Trying to understand the SS age 70 wait

[harllee]

I guess my net worth is lower than other people on this Forum (my net worth is definitely less than $5 million) and my SS payout is higher than most other people (combined SS payment of DH and I is around $60,000 per year) but when I run the numbers it appears to me that delaying SS to age 70 will be very beneficial to me and my husband. I am female and come from a long lived family so I factor that in also. To me that $60,000 per year SS payment is a major factor in my retirement plan.

 

[Andre1969]

I've run the numbers through FireCalc every once in awhile, and no matter when I project to take SS, it actually has very little bearing on my chances of success. So, because of that, I just don't worry about it.

Although, one thing I just thought of...the only thing I look for is chance of success. I don't look at how much the potential portfolio value ends up being. So I guess there's the chance that while all of my scenarios, from 62-70 are successful, some are "more" successful than others.

 

[daylatedollarshort]

I guess my net worth is lower than other people on this Forum (my net worth is definitely less than $5 million) and my SS payout is higher than most other people (combined SS payment of DH and I is around $60,000 per year) but when I run the numbers it appears to me that delaying SS to age 70 will be very beneficial to me and my husband. I am female and come from a long lived family so I factor that in also. To me that $60,000 per year SS payment is a major factor in my retirement plan.

I just threw out those numbers as an example to make it more obvious there is a continuum of ranges where the decision becomes not so important.

 

[ShokWaveRider]

From time to time folks discussing this topic have referred to getting a "return" by delaying social security. Though oft repeated by what I think are misguided financial journalists, you don't actually get a "return", at least not one that is surely positive, by delaying SS. Instead you receive the promise of a higher payment. The calculated "return" (if you insist on that term) could be positive if you live long enough, but it could be minus 100 percent, if you pass before claiming.

Just to be clear...

Not only that, you miss out on the reduced SS payments. In the case one takes SS at 62 at say $1,000 pm. That is $12,000 per year. If full retirement age is 67 that is 5 x $12,000 = $60,000. OK you get more at 67 but miss out on that $60k in the interim. $96k if you wait till 70.

 

[teejayevans]

Not only that, you miss out on the reduced SS payments. In the case one takes SS at 62 at say $1,000 pm. That is $12,000 per year. If full retirement age is 67 that is 5 x $12,000 = $60,000. OK you get more at 67 but miss out on that $60k in the interim. $96k if you wait till 70.

But then there’s taxes, if income is $50k and it’s broken down IRA/SS: 15/35, taxes are ~$250, if reversed 35/15 it’s ~$3350. So you might want to spend down IRA to have an extra money to keep to yourself.

 

[pb4uski]

+1. What the articles often miss is a probability tree type analysis - Probability Tree Diagrams (mathsisfun.com). With probability analysis, if you multiply the expected benefit by the probability you will be alive (less than 100% for anytime in the future and lower the further out you go in time). Plus add in the probability of future benefit changes, like potential SS cuts.

Like at age 70 you are going to get $30K, but there is only an 80% chance you will be alive, that makes the expected benefit $24K. If you think benefits might be cut for you in the future, then add in another 10% or whatever your best guess is, that makes the expected amount $21.6K.

The $30K is only guaranteed as much as you are guaranteed to be alive and your expected benefits are guaranteed to be unchanged.

That is why opensocialsecurity.com is such a valuable resource... it does these calculations of expected value using a mortality table or attained age that you choose... and then further will discount the expected values for the time value of money at a real discount rate of your choosing.

And also factor in a haircut for reduced benefits if you wish. The best SS claiming strategy tool available.

 

[ProGolferWannabe]

I am going through this analysis now myself. My wife and I are retired and are 59 (me), and 58 (obviously, my wife). The one nice thing about taking benefits early is that, assuming you need the income and can either spend your assets first and take social security later, or take social security now and defer spending your assets, is that in the later case if we die before 70, we have spent the “government’s money”, not our own. Our assets can be passed to our beneficiaries, so from an estate planning perspective, social security early sort of acts as an insurance policy to pass a minimum amount of wealth onto our kids. Hopefully, this makes sense, and more importantly is correct.

 

[Hermit]

There are a couple of things to consider. We do not have a crystal ball on our longevity. My wife died at 68, but started collecting at 62, so she had 6 years to collect.
The other thing is the present value of a future stream of income.
I think there is no one right answer, but depends on the individual situation.

My DW died at 49 so no collection there. However, I began collecting on her account when I retired at 63.5. I collected about half the amount I am now collecting on my own SS when I turned 70. Collecting that additional income for 6.5 years sure seemed like the right decision for me considering the amount of discussion without that sum coming in every month. I did loose any reasonable to opportunity to do Roth conversions because the extra income put me solidly in the 22% tax bracket. Like Souschef said, this calculation can vary depending on individual situations. When I discussed my situation with a SS representative, she thought I would surely want to start my own SS at 63.5. I don't think she had any understanding of the overall financial differences.

 

[chassis]

I am going through this analysis now myself. My wife and I are retired and are 59 (me), and 58 (obviously, my wife). The one nice thing about taking benefits early is that, assuming you need the income and can either spend your assets first and take social security later, or take social security now and defer spending your assets, is that in the later case if we die before 70, we have spent the “government’s money”, not our own. Our assets can be passed to our beneficiaries, so from an estate planning perspective, social security early sort of acts as an insurance policy to pass a minimum amount of wealth onto our kids. Hopefully, this makes sense, and more importantly is correct.

Excellent. It makes perfect sense to me. It is correct in the logic and reasoning.

 

[RunningBum]

I am going through this analysis now myself. My wife and I are retired and are 59 (me), and 58 (obviously, my wife). The one nice thing about taking benefits early is that, assuming you need the income and can either spend your assets first and take social security later, or take social security now and defer spending your assets, is that in the later case if we die before 70, we have spent the “government’s money”, not our own. Our assets can be passed to our beneficiaries, so from an estate planning perspective, social security early sort of acts as an insurance policy to pass a minimum amount of wealth onto our kids. Hopefully, this makes sense, and more importantly is correct.

Depends on when you die. If you live a long, long time, you might use up all of your assets no matter when you took SS, but you'd be less of a burden on your kids if you have the larger SS benefit from waiting past FRA.

I read a lot of posts where people talk about taking SS early to leave more for the kids, but that only works if you die before you breakeven point.

 

[ProGolferWannabe]

Depends on when you die. If you live a long, long time, you might use up all of your assets no matter when you took SS, but you'd be less of a burden on your kids if you have the larger SS benefit from waiting past FRA.

I read a lot of posts where people talk about taking SS early to leave more for the kids, but that only works if you die before you breakeven point.

I agree, which is why I referred to it as “insurance” as opposed to being a definitive way to leave more money to the kids. My thought is that between our pensions and our social security benefits at age 62 we should have more than enough to get by without touching our nest egg . If we live long enough, I’m sure you are correct, we would maximize our net worth by drawing down some of our assets sooner and deferring social security. But, by drawing SS early, we don’t have to worry about drawing down assets in a declining market (sequence of return risk), and we get about 18 years (62 to 80…with 80 being the break even point of deferring SS) of “protection” of “our money” from dying early.

 

[Jerry1]

I'm 60 and DW is 65. We have not started SS. Per the FA, our plan is for DW to start at FRA and for me to start at 62.

Question I have is there a good source to help me understand the rules for SS with respect to your spouse? It's a bit more complicated than I originally thought. For example, if I collect at 62 and pass, will DW get my FRA or something different and, if I collect at 70 and she still gets my FRA, what's the point with respect to benefitting your spouse.

Again, not looking for a specific answer to the question above, but a document that can explain the various scenarios. Or situation is a bit complicated because DW is a bit older and is also the one who made less money. However, she made enough that the getting half of mine scenario is off the table. Her SS alone is worth more than that.

 

[RetiredHappy]

I'm 60 and DW is 65. We have not started SS. Per the FA, our plan is for DW to start at FRA and for me to start at 62.

Question I have is there a good source to help me understand the rules for SS with respect to your spouse? It's a bit more complicated than I originally thought. For example, if I collect at 62 and pass, will DW get my FRA or something different and, if I collect at 70 and she still gets my FRA, what's the point with respect to benefitting your spouse.

Again, not looking for a specific answer to the question above, but a document that can explain the various scenarios. Or situation is a bit complicated because DW is a bit older and is also the one who made less money. However, she made enough that the getting half of mine scenario is off the table. Her SS alone is worth more than that.

Survivor (your wife) benefits amount will be the same as your benefits. If you start at 62, she will not get more than what you draw on. If you start at FRA, then her survivor benefits will be according to what you draw on at FRA. Similarly, if you draw at 70, then her survivor benefits will be that. All adjusted for COLA obviously. My advice is to not put your trust entirely on your FA.

Have you checked out opensocialsecurity.com?

 

[Jerry1]

My advice is to not put your trust entirely on your FA.

Have you checked out opensocialsecurity.com?

No intention on fully trusting the FA, but I do look at his advice as a starting point.

No, I have not checked out opensocialsecurity.com. I can imagine that it will allow me to run various scenarios, but I was looking for something like a document I could read. Would it have that?

 

[pb4uski]

Jerry, there isn't much to say... if you are both collecting and you pass then she gets the higher of the two checks and the lower of the two checks goes away.

I'm waiting until 70 because I was the higher earner and since we are both in excellent health at 66 there is more than a 50% probability that one of us will live to our early 90s.

 

[RetiredHappy]

No intention on fully trusting the FA, but I do look at his advice as a starting point.

No, I have not checked out opensocialsecurity.com. I can imagine that it will allow me to run various scenarios, but I was looking for something like a document I could read. Would it have that?

Lots of information on ssa.gov. I have gone through that site with a fine tooth comb at least a dozen times through the years.

 

[target2019]

No intention on fully trusting the FA, but I do look at his advice as a starting point.

No, I have not checked out opensocialsecurity.com. I can imagine that it will allow me to run various scenarios, but I was looking for something like a document I could read. Would it have that?

It does let you print the results. I found that site to be the most informative in that it helped me understand many more of the comments in several threads.

 

[Montecfo]

It's not return people are focused on its insurance. What is the "return" on your home owners insurance if your house doesn't burn down?

Hi qwerty3656,

The insurance aspect is real, agreed. Saying you get a "return" by waiting to claim is not.

I would never say I got a "return" by taking out fire insurance. Agree with you on that.

 

[neihn]

Jerry, there isn't much to say... if you are both collecting and you pass then she gets the higher of the two checks and the lower of the two checks goes away.

This is what I understand too.

 

[Sunset]

I agree, which is why I referred to it as “insurance” as opposed to being a definitive way to leave more money to the kids. My thought is that between our pensions and our social security benefits at age 62 we should have more than enough to get by without touching our nest egg . If we live long enough, I’m sure you are correct, we would maximize our net worth by drawing down some of our assets sooner and deferring social security. But, by drawing SS early, we don’t have to worry about drawing down assets in a declining market (sequence of return risk), and we get about 18 years (62 to 80…with 80 being the break even point of deferring SS) of “protection” of “our money” from dying early.

While we have a projected date to take SS, that plan could change if 1929 happened again, a prolonged downturn would be an early trigger for us.
Until then there is no declining market.

 

[RunningBum]

While we have a projected date to take SS, that plan could change if 1929 happened again, a prolonged downturn would be an early trigger for us.
Until then there is no declining market.

I agree, you don't have to predict a big downturn, you can just react to it.

 

[ProGolferWannabe]

I agree, you don't have to predict a big downturn, you can just react to it.

Makes complete sense.

 

[Out of Steam]

Excellent. The impression I get from these threads is that some posters seem to be seeking a way to game or beat the system. Do the math. 2% net worth improvement for a single survivor at age 90+ is not beating the system. It's a wash; actuarially neutral.

For someone expecting above-average longevity, the differences in net-present value of the Social Security benefit itself can be significant. In our case, even assuming only one of us with above average longevity, up to 15%.

The difference becomes much smaller when you consider the impact of spending down assets to live on while waiting for Social Security. With increasing prices, we anticipate a 4% draw rate of retirement savings for the next 12 months.

Delaying my benefit may well be a wash, but my larger concern is the opportunity to increase my wife's survivor benefit. At 90, the fact that Social Security doesn't require management is good.

 

[imnontrad]

First of all, the break even analysis completed by JP Morgan, shows that waiting until 70 results in more money. (https://am.jpmorgan.com/us/en/asset-management/adv/insights/retirement-insights/guide-to-retirement/)

Second, the (recently revised) longevity tables are based on the average life expectancy for everyone born in a certain year - including all those who died as children. So if you have made it until 60 and are in decent health, chances are you will live a lot longer than the "drop dead" date for your year group. I read somewhere that there is a 50% chance that at least one spouse of a married couple will live past 90.

In addition, if married with a spouse the same age or younger, chances are she will outlive you by many years. If her SS benefit is less than yours than if you wait until 70, not only will you have a MUCH larger SS check but your wife will have the largest possible benefit for the rest of her life.

 

[GoodLife59]

A couple of things I think about. Delaying as long as possible gets you a bigger monthly payment. But you don’t know how long you’ll live. The world forces us to think more about our mortality all the time. The SS program is under constant political threat. The pandemic has caused many people to take retirement earlier than expected resulting in a record number of new filings for benefits. Thus SS reserves have been drawn down significantly. This may force Congress to enact changes that may potentially reduce benefits at some point in the near future. But it might be politically prudent to not let new changes impact people already receiving benefits. Finally, taking benefits when you are eligible after you are no longer working can be a cash flow edge against market volatility in your retirement accounts. Just my opinions.