Another reason to claim Social Security at 62

[Flieger]

From SSA.gov/pubs/EN-05-10084, it states Surviving spouse at (their) full retirement age or older gets 100% of the worker's (spouses) basic benefit amount. I think basic benefit amount means their PIA. I understood this to mean they only get the PIA amount, not additional. Can you show me publication that shows a higher amount? That would be great to know for my planning! Thanks.

Flieger

 

[Gumby]

I struggle with how to think about the effect of the survivor benefit if I die early. If I die early, she can use everything to fund her life that was formerly intended to fund both our lives. Also, I doubt she's going to continue blowing the dough on the expensive things we presently do together, as she's more frugal by nature. I don't expect her to live a reclusive life of a grieving widow, but I believe she would scale back naturally. She might get along just fine when I'm gone on less than she could otherwise have had, which should still be plenty. In summary, I'm not sure how big a deal to make of the survivor benefit in our decision of whether I, the higher earning and older spouse, should delay to 70.

Many expenses do not decrease simply because one of the couple died. Real property taxes, utilities, insurance, maintenance and repair costs for your house will likely stay close to the same as they are now. And income tax will actually go up for her, since she will be filing single. If you do a lot of the chores/repairs around the house, lawn and cars, she will have to pay someone to do the same thing after you are gone. And so on and so forth.

 

[Lorenzo]

Many expenses do not decrease simply because one of the couple died. Real property taxes, utilities, insurance, maintenance and repair costs for your house will likely stay close to the same as they are now. And income tax will actually go up for her, since she will be filing single. If you do a lot of the chores/repairs around the house, lawn and cars, she will have to pay someone to do the same thing after you are gone. And so on and so forth.

Good points, and I'm sure you're right for many cases. In our case, however, we spend more on experiences than housing and cars and such. I suspect she would not stay in the same house, since we don't really have ties to the area, and perhaps move back to the country of her birth.

 

[sengsational]

^^^ You can go back to post #385 which showed the real differential cash flows between 62 and 70 and the real IRR of the real differential cash flows.

Go down the IRR column until you get to the real return of your TIPS. Let's say that your i-bonds and TIPS are returning 2% real.... then your breakeven would be between 81 and 82.

Alternatively, let's say that you expect to live to be 85, then the money that you are using while delaying SS would need to earn 3.77% or more real return in order for taking SS at 62 to be financially preferable. IOW, if you live to 85, a 3.77% real return is the break-even point... if your investments earn less than 3.77% real then you are better off delaying SS but if they earn more than 3.77% real then you are better off taking SS early.

Thanks for that example of how to use the table. I looked at it for a minute, but given my level of patience for such matters, I needed the explanation It makes sense now.

As to the 2%, 3%, 4% columns...let's see if I get this. Say I think inflation will be 2.5%, and I think my portfolio will average 7.5%, so 3% real. I go down the 3% column and see it goes negative at age 84. That means if I make it to 84, I'm ahead by $4,209 if I claimed at age 70? And if I make it to 94, I'd be ahead by $81,049 if I claimed at age 70? On the risk side, I could be leaving as much as $79K on the table if I die right before claiming (presuming single, which I'm not, but just for simplicity).

 

[MichaelB]

I struggle with how to think about the effect of the survivor benefit if I die early. If I die early, she can use everything to fund her life that was formerly intended to fund both our lives. Also, I doubt she's going to continue blowing the dough on the expensive things we presently do together, as she's more frugal by nature. I don't expect her to live a reclusive life of a grieving widow, but I believe she would scale back naturally. She might get along just fine when I'm gone on less than she could otherwise have had, which should still be plenty. In summary, I'm not sure how big a deal to make of the survivor benefit in our decision of whether I, the higher earning and older spouse, should delay to 70.

My mum is frugal but after my father passed away she started spending money on herself. Her living expenses fell some but not much, and travel and taxes more than offset the savings of a household of 1. She was fortunate that she had her own 401k in addition to the survivors benefits he left, and it’s enough to now pay for assisted living, which is quite expensive.

 

[RetiredHappy]

I struggle with how to think about the effect of the survivor benefit if I die early. If I die early, she can use everything to fund her life that was formerly intended to fund both our lives. Also, I doubt she's going to continue blowing the dough on the expensive things we presently do together, as she's more frugal by nature. I don't expect her to live a reclusive life of a grieving widow, but I believe she would scale back naturally. She might get along just fine when I'm gone on less than she could otherwise have had, which should still be plenty. In summary, I'm not sure how big a deal to make of the survivor benefit in our decision of whether I, the higher earning and older spouse, should delay to 70.

I think it depends on whether SS is the sole or majority of the income. If you have a large nest egg and SS makes up only a small portion of the income, then it doesn't really matter how large the survivor benefit is. In our case, losing one SS due to death, still results in having more money for the survivor to spend because reduction in expenses for the deceased is far more than the loss of one SS.

Examples of reduced expenses, we eat out everyday for lunch, average bill is $60 to $70 per meal for two. Half that when one passes, and also likely that the other person would not want to eat out everyday. Medical costs will be halved. Our trips, about $50K a year will be halved or maybe dropped to about $10K a year. I won't want to keep travelling without my spouse and my husband feels the same way. Lots of savings when one is left behind.

 

[Gumby]

I think it depends on whether SS is the sole or majority of the income. If you have a large nest egg and SS makes up only a small portion of the income, then it doesn't really matter how large the survivor benefit is. In our case, losing one SS due to death, still results in having more money for the survivor to spend because reduction in expenses for the deceased is far more than the loss of one SS.

Examples of reduced expenses, we eat out everyday for lunch, average bill is $60 to $70 per meal for two. Half that when one passes, and also likely that the other person would not want to eat out everyday. Medical costs will be halved. Our trips, about $50K a year will be halved or maybe dropped to about $10K a year. I won't want to keep travelling without my spouse and my husband feels the same way. Lots of savings when one is left behind.

As long as you are both on board with that outcome. I laid my plans to ensure that the young wife will have at least the same amount of money coming into the house after I'm gone as before, so she will be free to choose to downsize the house, travel less, eat out less or otherwise spend less, rather than having those things forced upon her by financial constraints. Providing that assurance does not measurably impact our current standard of living, and I feel that my marital promise to take care of her includes making the best provision I can for her widowhood.

 

[AudiDudi]

My understanding is that if I were to die tonight, she would get the full amount that I am currently receiving. (we are both over 70 and drawing our own benefit) Her benefit would basically disappear as mine is about 75% greater than her's due to me filing at 70.

 

[Texas Proud]

It is really strange to see how some are really getting their panties in a knot over this...

There is NO real answer... because the answer depends so much on an event that is unknown...

AND, in the end who cares as you will be dead...

The only thing IMO that makes a difference is the posts (like mine) that has a spouse that is younger and will probably get more if you wait till you are 70... if you are single, do whatever, take it, wait... it does not change that much either way...

 

[RetiredHappy]

As long as you are both on board with that outcome. I laid my plans to ensure that the young wife will have at least the same amount of money coming into the house after I'm gone as before, so she will be free to choose to downsize the house, travel less, eat out less or otherwise spend less, rather than having those things forced upon her by financial constraints. Providing that assurance does not measurably impact our current standard of living, and I feel that my marital promise to take care of her includes making the best provision I can for her widowhood.

In our case, we have more than enough so we don't even "need" to be onboard with the outcome. We don't need to change our lifestyle even one is gone. I am merely saying that the survivor will have way more to spend than before. I am looking at the option of declining part of my IRA spousal inheritance if my spouse passes before me, so that that amount goes to the contingent beneficiary to lessen the tax burden. But it is a moot point because I may go first.

 

[N02L84ER]

Flieger, check out this website. Open Social Security: Free, Open-Source Social Security Calculator
Fill in some basic info and look at the data in the table towards the bottom. The last 3 lines will show 1) what the two receive individually while both spouses are still alive once both spouses are aged 70 unless you specify that one dies before age 70, 2) what spouseA will receive if spouseB dies first, and C) what spouseB will receive if spouseA dies first. The highest individual amount in 1) is what is shown in 2) and is what is shown in 3)

 

[pb4uski]

Thanks for that example of how to use the table. I looked at it for a minute, but given my level of patience for such matters, I needed the explanation It makes sense now.

As to the 2%, 3%, 4% columns...let's see if I get this. Say I think inflation will be 2.5%, and I think my portfolio will average 7.5%, so 3% real. I go down the 3% column and see it goes negative at age 84. That means if I make it to 84, I'm ahead by $4,209 if I claimed at age 70? And if I make it to 94, I'd be ahead by $81,049 if I claimed at age 70? On the risk side, I could be leaving as much as $79K on the table if I die right before claiming (presuming single, which I'm not, but just for simplicity).

You got the idea, but 7.5% nominal less 2.5% inflation would be 5% real, not 3% and I didn't include a 5% real column.

 

[sengsational]

You got the idea, but 7.5% nominal less 2.5% inflation would be 5% real, not 3% and I didn't include a 5% real column.

I'm usually better at math than 7.5-2.5=3.0

ETA: I'm optimistic on returns and pessimistic on attaining a great age. If I were single, I'd take it now (actually would have taken it a few years ago at 62). I calculated the 5% column, and I'd have to make it to age 89. But the lower earning, healthy wife changes the calculus.

 

[pb4uski]

Yes, my SAHM DW changed the calculus the same way.

 

[jekbrown]

I am 65 and in good health, so it would be unreasonable for me to plug in a death at 69. Obviously, I could step in front of a school bus carrying disabled, pregnant, nuns, but that is not something that one plans for (if it did happen, I would make the news!). DW and DD would be just fine (financially) if I did croak at 69, without my SS, but that sure would mess up my spreadsheet!

I hope you live a long, happy, and healthy life. I'm just saying, it's one scenario where waiting results in worse outcomes. Could be a car accident, meteor strike, safe and effective, just about anything. When your number's up, it's up. I just had a coworker friend pass suddenly at 50. Lots of people dying young recently.

 

[youbet]

No.
Flipping a coin is a binary operation.
Projected lifespan from birth is a rather smooth curve with thousands of possible outcomes from age 0 to age 115 or thereabouts.
The use of "likely" for the 50/50 age is correct...

No.
Since the use of a descriptive, but not quantitative, word like "likely" will always be subject to some interpretation, I'll stick to my guns on this one. If the descriptive statistics say a person with some certain set of characteristics has a 50% chance of reaching age X, I'm going with that not being a "likely" event since half the time it will not happen.

 

[bada bing]

No.
Since the use of a descriptive, but not quantitative, word like "likely" will always be subject to some interpretation, I'll stick to my guns on this one. If the descriptive statistics say a person with some certain set of characteristics has a 50% chance of reaching age X, I'm going with that not being a "likely" event since half the time it will not happen.

If it fixes the semantics, replace reaching age X with reaching age (X-10 minutes). The boundary between likely and not likely life expectancy can be parsed down to a few minutes in a cohort as large as the USA population. Social Security benefit strategies can only be parsed down to +/- a month.

 

[Exchme]

EN-05-10084

Your confusion arises because there are technically several different benefits being paid. While you are both alive and both have claimed, each spouse is getting their own benefit and the lower earner may also get a spousal benefit. If the lower earner passes first, their benefit disappears and the higher earner's benefit continues.

But they wanted the total continuing benefit to be the same (the higher earner's benefit) regardless which spouse passed first, so if the higher earner passes first, the math is harder to follow.

In that case, the higher earner's benefit and the spousal benefit disappears, the survivor benefit kicks in and the lower earner's benefit also continues.

The survivor benefit is just what's needed to make the sum of the survivor benefit + lower earner's benefit equal to the higher earner's benefit.

 

[pb4uski]

No.
Since the use of a descriptive, but not quantitative, word like "likely" will always be subject to some interpretation, I'll stick to my guns on this one. If the descriptive statistics say a person with some certain set of characteristics has a 50% chance of reaching age X, I'm going with that not being a "likely" event since half the time it will not happen.

And I'll stick to my guns that you are still wrong.

I think we would agree that if something has a 90% chance of happening that it is likely to happen. Same with 80%. OTOH, 10% or 20% is unlikely. Follow the pattern until you get to a break point between the two.

With longevity, if you are boiling it down to a single age then 50% is the break point. That's the way that they do it whether you like it or not.

Also, likely is a synonym for probable. I guess if you want to be anal about it that the break point should be greater than 50%, so to make you feel better I'll amend what I said from it being likely that someone would live to be 86 (50% probability) to it being likely that someone would live to 85.9 (greater than 50% probability). Happy?

Or perhaps we should do a poll.

 

[gianmatt]

From SSA.gov/pubs/EN-05-10084, it states Surviving spouse at (their) full retirement age or older gets 100% of the worker's (spouses) basic benefit amount. I think basic benefit amount means their PIA. I understood this to mean they only get the PIA amount, not additional. Can you show me publication that shows a higher amount? That would be great to know for my planning! Thanks.


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Flieger

There's a big distinction between what the survivor gets if the spouse died before claiming vs. having already claimed. What you're quoting is if the deceased hadn't been getting benefits. SSA has their rules for calculating the survivor benefit in that situation.

If the deceased was already getting benefits, the surviving spouse simply gets that amount. If the deceased claimed at 70, the survivor gets that higher amount.

 

[gianmatt]

And I'll stick to my guns that you are still wrong.

I think we would agree that if something has a 90% chance of happening that it is likely to happen. Same with 80%. OTOH, 10% or 20% is unlikely. Follow the pattern until you get to a break point between the two.

With longevity, if you are boiling it down to a single age then 50% is the break point. That's the way that they do it whether you like it or not.

Also, likely is a synonym for probable. I guess if you want to be anal about it that the break point should be greater than 50%, so to make you feel better I'll amend what I said from it being likely that someone would live to be 86 (50% probability) to it being likely that someone would live to 85.9 (greater than 50% probability). Happy?

Or perhaps we should do a poll.

"Likely" is a vague term. In probability, it's generally used to compare, e.g. "this outcome is more likely to happen than that outcome" or "this outcome is most likely out of this list of possible outcome."

If we're trying to decide whether something with a 50% chance is "likely" or "probable", I'd say no because it's equally likely/probable that it doesn't happen. Semantics? Maybe! If we simple say that you have a 50-50 shot at living to 85, everyone knows what that means.

 

[Gumby]

Who would ever guess that the description of a 50% probability could be the source of an argument?

 

[Perryinva]

I am always surprised at how many posts these SS threads go. It is actually amusing how the exact same arguments pro & con for each age are repeated ad nauseum. Pretty much no one seems to regret their decision as to whenever they filed, which, of course is always true until they do, and then they don’t post about that. My plan was for age 70, retired at 61. DW (6 years older) wanted hers at 62, & falls in to the “bird in the hand/family doesn’t have longevity/small SS amount/some health issues/only understands simple math” category. I delayed until 66/2 a few months shy of FRA. IRA reduction for RMDs, survivor benefit & Roth conversions were the reasons for delaying. Last tax time I realized that we were losing a significant state tax break due to higher income, about $4k/yr, good until RMD time. Roth conversions, after said and done, were only going to save us small potatoes (maybe $2k) after compounding, particularly since they were state taxed as well, (chance if moving to state income tax free state) but I DID want a larger Roth, which has doubled now over $500k, just in case. Tax free growth is enticing. Like others, however, tIRA growth, even with withdrawals and conversions, continues to increase, so RMDs that will eliminate the tax break and increase the income beyond what we would use are seemingly inevitable, (both have pensions that out us at just under 22% bracket so little incentive for very large conversions) yet still not at the top of the current 22% bracket.
So tax reduction from Roths sort of “meh” and DW constantly could not understand delaying for the reasons stated. But what actually made me decide to file was that I realized amount at 66/2 was the same as what I had planned on when deciding to wait until 70 before I retired, coupled with the small total difference that waiting until 70 would bring through age 92.

 

[Murf2]

Who would ever guess that the description of a 50% probability could be the source of an argument?

Around here it’s highly likely!

 

[MarieIG]

Who would ever guess that the description of a 50% probability could be the source of an argument?

A certain Site Team . . .