PDA

View Full Version : Anyone know about Social Security?



Wade Lippman
05-26-2014, 9:03 PM
I haven't been able to find a decent SS forum, so I figure this is as good as anyplace.

My wife is a year and a half older than me, and about to hit 62. I know everyone says to wait until 66 or 70, but my math is that it takes 22 years for that to pay off, and I am not going to worry about 2036 now. Our tax rate should be the same for the foreseeable future, so I don't see any point to waiting.
Are there any clever strategies or gimmicks I should be thinking about? I have read various articles with all sorts of things to do, but none of them seem particularly appropriate.
My benefit is nearly twice hers, but my understanding is that she is only entitled to spousal benefits of 40% of mine, so there doesn't seem to be anything there.

Any advice, good websites, or anything else is appreciated.

David Weaver
05-26-2014, 9:19 PM
You don't really have to rely on anyone else's descriptions of what they would do. I don't know what your social security normal retirement age is, but I'll assume that it's 66, nor do I know what your wife's is, but I'll assume the same. The social security reduction is 5/9% per month up to 36 months and 5/12ths beyond that. (6 2/3rds percent per year, and then 5% per year, so a total reduction of something like 25% for early commencement.

If your circumstances make it better to start earlier, then by all means do so.

Part of the strategy to defer taking social security probably has to do with tax considerations, in terms of what you have to pay taxes on (in terms of your earnings and wages - like if you pay SS taxes before normal retirement age, and not after - I'm not sure about the tax treatment. Also, if you're in a higher tax bracket, then it might be more advantageous to wait.

Take a guess at your life expectancy, the reduction factors are chosen to provide a sort of equivalence, so there is no real reason to scheme them other than tax considerations, at least as far as I can tell. One thing you won't do is take the money, put it in a side fund and earn 6 2/3rds percent without any risk to match delaying payment, but at the same time, if you delay taking payment, you risk not getting anything, or not getting much at all.

If you don't have tax considerations and have good use for the money (paying down debt, etc), I'd probably start early.

David G Baker
05-26-2014, 9:47 PM
I don't know much about SS but many companies bring in a specialist to help educate their employees about SS. I took mine at 62 because the males on both sides of my families do not have a history of longevity most die in their mid 50s to late 70s. The main thing that I learned from the specialist is that if I actually retire at the of 55 I can access my 401K and IRAs with out any penalty and because the money in the 401K and IRAs are tax deferred you want to live off of your non tax deferred money and save the tax deferred money for when you are in a lower tax bracket. The thing that is the most important when you retire is medical insurance. You will not have access to Medicare until you are 65. This may have changed with all of the Obama Care issues.

Steve Peterson
05-26-2014, 10:07 PM
Before starting, I have to warn you that I am not an expert at the rules, so you may need to double check. It may be possible to have your wife draw half of your benefit until she reaches the maximum collection age of around 70, then her benefit should be higher.

Steve

David Weaver
05-26-2014, 10:16 PM
I don't know much about SS but many companies bring in a specialist to help educate their employees about SS. I took mine at 62 because the males on both sides of my families do not have a history of longevity most die in their mid 50s to late 70s. The main thing that I learned from the specialist is that if I actually retire at the of 55 I can access my 401K and IRAs with out any penalty and because the money in the 401K and IRAs are tax deferred you want to live off of your non tax deferred money and save the tax deferred money for when you are in a lower tax bracket. The thing that is the most important when you retire is medical insurance. You will not have access to Medicare until you are 65. This may have changed with all of the Obama Care issues.

It's likely going to be a little cheaper due to limitations on age rating on individual policies, but the policies will still be expensive. For an 80% type policy, which I believe is the "silver" rated policy, it'll still be something like $8k a year here for individual on a rate schedule that I have.

So, it's still a real issue.

Of course, you can forgo insurance and pay a much lower penalty tax (that is only $95 the first year, IIRC, and something like $695 or so when fully phased in). I don't know if forgoing insurance between 55-65 is a great idea, though, especially now that younger individuals are paying part of the insurance cost for older individuals (the younger folks get the other side of the sword in the age rating game, they subsidize the older folks, thus the spate of news articles about young folks having their premiums double).

That said, if someone manages to have fairly low income in those interim years, they could get some subsidy on federal exchanges.

Mel Fulks
05-26-2014, 10:34 PM
I don't have to think about such things very long to get a headache. But in the decision about starting to draw at 62 or waiting I've found many don't understand that if they retire early,wait to start draw, and take a lesser or part time job they
REDUCE their ultimate draw since the formula for figuring is weighted toward what income was in the last few years.

Bob Vavricka
05-26-2014, 11:21 PM
It's real easy to figure. But, first you have to determine how many more years you are going to live. :-)
I still haven't figured that part out, so decided to take SS early while I worked on finding the answer.
As already mentioned, there are different answers depending on your circumstances...Still not an easy decision.

Wade Lippman
05-27-2014, 9:41 AM
Before starting, I have to warn you that I am not an expert at the rules, so you may need to double check. It may be possible to have your wife draw half of your benefit until she reaches the maximum collection age of around 70, then her benefit should be higher.

SteveThank much, that is a good lead.
It doesn't actually work like that though. It would be just the opposite. I found this example that fits out situation exactly.

"Beginning at age 62, Mrs. Brown gets $978 a month in early retirement benefits. Beginning at age 66, Mr. Brown receives a spousal benefit of $767 a month (50 percent of his wife's full retirement benefit of $1,534/month). Then, at age 70, Mr. Brown stops receiving the spousal benefit and begins receiving $3,209 a month (the maximum amount of his retirement benefit)."

I would have to wait quite a while, but it has the added benefit that she would be entitled to survivor benefits at my level; so it appears to be a great deal.

Kev Williams
05-27-2014, 11:25 AM
If I wait till I'm 72, I'll make nearly twice as much as I'll make at 62-- approximate numbers are $1400 a month now, $2600 10 years from now...

Well, lets see-- 1400 x 10 years is $168,000. To make that amount if I wait till 72 will take nearly 5-1/2 years. By then I'll be nearly 78 years old

If I live that long. Or live the extra 10 years in the first place...

My math says collect it NOW, even if you WANT to wait. Just put it in the bank or whatever you consider a good investment. Even at only 2% you'll have $188,000 10 years later. You'll still get $1400, plus you can draw another $2500 on top of that for 7-1/2 years before the $188k is gone. If you pull only $1600 to add to the $1400, it'll last 117 months (plus more for interest)

I don't know about anyone else, but I'M not waiting--- :)

William Payer
05-27-2014, 3:14 PM
If I wait till I'm 72, I'll make nearly twice as much as I'll make at 62-- approximate numbers are $1400 a month now, $2600 10 years from now...

Well, lets see-- 1400 x 10 years is $168,000. To make that amount if I wait till 72 will take nearly 5-1/2 years. By then I'll be nearly 78 years old...

Ken, a little correction to your math. The 5.5 year point where you say you will break even , is really further down the age line than that. During that 5.5 year period to "catch up" and break even , ou forgot the original situation of drawing $1400/month would still be on going. This would give you another ($1400x12x5.5= $92,400 ) At any rate, your conclusion remains the same.

Rich Engelhardt
05-27-2014, 4:45 PM
Any advice, good websites, or anything else is appreciated.I called the local SS office and talked to a guy there.
I was pretty amazed at how helpful he was since my experience with anyone employed by the .gov or even remotely associated with the .gov has never been real positive in that respect

Larry Browning
05-27-2014, 5:56 PM
Surly there are local advisers in your town that do this sort of thing for a living, like a financial adviser or some such. To me this is such an important decision in your life that paying someone who knows the ins and out of the whole thing would be a very good investment. This is my plan, even though I have not actually looked for someone to help me! (and I am already 62). Guess I had better get to looking, huh?

Stan Calow
05-27-2014, 7:22 PM
What Bob said is true- it all depends on how long you will live. I am of school of thought that it is better to start collecting as soon as you can, even if its less. You can run the numbers all you want, but you also have to consider if you will be living the life you want during the time you are waiting for the full payment to begin.

Larry Frank
05-27-2014, 8:35 PM
My wife and I found a good financial adviser quite a few years ago and started planning at that point. There is so much more to retiring and figuring out finances and such that it can make your head spin. A good financial adviser can lead you through all of the various things and the advantages of doing different options. So much depends on the rest of your finances. You need to take stock of your entire finances and what you want to do when you retire. In addition, you will need to think about medical coverage. The choice as to when to take social security is more about your current situation that it will be about how much you get when.

I urge you to find a financial adviser.....it is the best way to go in my opinion.

I found my financial adviser by talking with a couple of very trusted friends and got a recommendation on who they utilize.

If you talk with one, and do not get a good vibe then move on.

David Helm
05-27-2014, 8:35 PM
I started mine at 64. If you look at actuarial tables, you will find that it doesn't really matter when you start, the total payout works out to be about the same. Waiting till 70 will give you a larger monthly, but the shorter life expectancy balances the total payout with what you would get from early retirement. Since I am now 71, and have outlived other males in my family by 11 years, I feel I am ahead of the game.

Nike Nihiser
05-27-2014, 9:23 PM
I'm no expert, but I don't think that's true that the formula is weighted more for later years of work. I've looked at the formula quite a few times and I just don't see it your way. It takes your highest 35 years, indexes for inflation and figures an average, then multiplies that average times 90% for part of it, then a lesser % for the next part, and so on. BTW I'm 64 and started collecting at 62

Ed Aumiller
05-27-2014, 9:28 PM
The amount of money you will receive will be the same by the time you reach 78 if your full retirement age is 66... If you take the amount you will receive at age 62, multiply it by 12 months by 16 years will equal the same amount you will receive if you start at 66, multiply it by 12 months by 12 years...

I learned this when I started SS...

So, if your life expectancy is over 78 years old, you are better to wait till you are 66 to start because then when you turn 78 you will be getting more per month because it is not reduced...
If your life expectancy is less, you are better off to start at age 62... if you then happen to live past 78, you would keep receiving the reduced amount...

I started at 62 because the men in my family rarely lived past 72...
My wife's life expectancy is into the 90's, so it would have been better for her to start at 66 if using only her benefits... however she started at 62 because she is 5 years younger than I am, her benefit at age 66 would be less than my benefit when I croak and she will automatically receive what I was receiving at the time of my death..

The 2 main items to consider are life expectancy of over 78 years and what position your spouse will be in after considering what the spouses benefits will be on your earnings and on her earnings...

Also, SS benefits are NOT determined by the last few years you work, they are determined on the years you earned the most money (often this IS the last years you worked, but not always)

David Helm is correct, the number to use for life expectancy is 78 years..

This does not include Cost of Living raises as they should not be included but will also work out the same...

William Payer
05-28-2014, 8:47 AM
Another consideration we used to make our decision to take SS beginning at 62 was, even if we live longer than 78, our lifestyle during our younger years will be more active, hence we will be able to use the extra money (taking at 62). After age 78 I would assume we will be leading a "more subdued" lifestyle and our $$ costs ( other than medical) will most likely decrease.

Rich Engelhardt
05-28-2014, 11:55 AM
Surly there are local advisers in your town that do this sort of thing for a living, like a financial adviser or some such. To me this is such an important decision in your life that paying someone who knows the ins and out of the whole thing would be a very good investment.
Larry, the biggest problem there is that the advisor wants you to do what's best for the advisor & not necessarily what's best for you.
They make their money by having you follow their advice & their advice, more often than not, involves you investing in some vehicle that pays them some sort of stipend or percentage.

It's tough to find a 100% objective advisor that will give you advice that's best for you, even if it means getting less $$ from you.

On the plus side - a lot of them (financial advisors) offer a bang up free dinner to come out and listen to their sales pitch!
I have a great steak dinner coming u p here in a few weeks.
All I have to do is sit through an hour and a half seminar. Considering the quality (really the lack of quality) of TV these days, a seminar is no worse than any of the other reality shows :D

Wade Lippman
05-28-2014, 12:04 PM
The amount of money you will receive will be the same by the time you reach 78 if your full retirement age is 66... If you take the amount you will receive at age 62, multiply it by 12 months by 16 years will equal the same amount you will receive if you start at 66, multiply it by 12 months by 12 years...


Its not that simple. The money you receive now (at 62) is worth more than the money you will receive in 4 years (at age 66). Net present value and all that. I used a discount rate of 4% and came up with 22 years to break even.

My wife signed up now; there don't seem to be any clever strategies for her, but I appreciate everyone's help.
She probably should have done it a month ago, but apparently she gets another dollar a month in compensation for waiting.

Larry Browning
05-28-2014, 2:01 PM
Larry, the biggest problem there is that the advisor wants you to do what's best for the advisor & not necessarily what's best for you.
They make their money by having you follow their advice & their advice, more often than not, involves you investing in some vehicle that pays them some sort of stipend or percentage.

It's tough to find a 100% objective advisor that will give you advice that's best for you, even if it means getting less $$ from you.

On the plus side - a lot of them (financial advisors) offer a bang up free dinner to come out and listen to their sales pitch!
I have a great steak dinner coming u p here in a few weeks.
All I have to do is sit through an hour and a half seminar. Considering the quality (really the lack of quality) of TV these days, a seminar is no worse than any of the other reality shows :D
Rich,
I was not thinking about one of those investment advisers, I was thinking more about someone you would actually pay a fee to. Maybe even a lawyer who specializes in SS, not the disability guys, but a retirement specialist that knows all the rules and how it actually works. As proven here in this thread, there is a lot of misunderstanding and confusion about all of this, and it really does depend on each persons particular wants and needs. What is the perfect strategy for one person is the worst solution for another. As I said before, I haven't actually sought one out yet, but I would think they are out there. I know I would be willing to pay several hundred dollars to an expert that would take the time to interview me, do a little specialized research, run a few numbers, and then give me a few options to pick from, pointing out the pros and cons of each option.
Does such a person exist? If not, it seems like it might be a great business opportunity for someone smarter than me.

John M Wilson
05-28-2014, 2:29 PM
Rich,
I was not thinking about one of those investment advisers, I was thinking more about someone you would actually pay a fee to.

+1

One of the first questions you should ask, after you have gotten the preliminaries out of the way:

"Are you a Fiduciary?"

This means, when I pay you my fee, do you have the legal and moral obligation to put my needs first -- above the needs of your firm, and anyone else making profit on this deal.

If you have a for-fee, fiduciary adviser, that person is working for you, and is legally bound to give you the best advice that they can.

Non-fiduciary advisers, who are deriving their income from someone else, may still give you good advice, but are not legally bound to tell you of other options that they may know to be better for you.

Anyone that you are not paying, that is, they get their income from selling something or from an investment firm, is not necessarily bad. You just have to realize that the advice that they give is based on the needs of whoever is paying them.

Good financial advisers exist. My wife and I have one. They should have the heart of a teacher: explaining to you what the options are, and allowing you to make an informed decision. Don't base your financial life on hearsay or advice from others, no matter how well informed.

Good Luck!

Mel Fulks
05-28-2014, 4:11 PM
I don't know if each state has a definition of what a financial adviser is. I do know someone who has one who is good with stocks but NOT SS . She lost job at 62 was told by adviser she needed to work a few more years . She had no chance of getting a job making as much money as before. So not starting to draw SS would have been a mistake. (As per my other post)

Larry Frank
05-28-2014, 8:23 PM
Finding a good financial adviser is not easy and one should put a lot of effort into finding the right one. The one we have was based upon recommendations from close friends. The first thing we did with him was to sit down and talk about our overall plans and comfort level with different types of investments. We pay the adviser a quarterly fee instead of something based upon the value of our accounts. We meet with him at least quarterly and more often if needed. I would never get one based upon a free meal.

What is needed is for you or the adviser to lay out a plan for the next 30 years showing how much you will spend and where the income is coming from. We provided the adviser with a years worth of how much we spent and what we spent it on so that we had a very good estimate of our needs. He used this with estimates of inflation and spending patterns as you get older to see if we had sufficient resources for the future and how much you can spend a year and still have money 25 years from now.

There is no simple answer for when to start taking social security as it is really based upon your total financial situation.

Bob Rufener
05-28-2014, 8:27 PM
I have been on social security since I turned 62. I went to a near by social security office and they had a program that will tell you what you will receive by retiring at different ages. I have had a heart attack so chose to go at 62. I will have to hit 78 before I lose money. I figure, I might as use the money while I can still enjoy it. Everyone's position is different so you have to factor in your own investment income, work income, spouses age, or other to see what fits best for you. My recommendation is to go to a social security office and find out from the people there what your payments will be at the different age levels and choose what is best for you.

Rich Engelhardt
05-30-2014, 7:06 AM
Rich,
I was not thinking about one of those investment advisers, I was thinking more about someone you would actually pay a fee to. Maybe even a lawyer who specializes in SS, not the disability guys, but a retirement specialist that knows all the rules and how it actually works
I'm real leery of those people. Really, really really, leery.
My mother and father in law lost $30,000.00 to one of them.
The creep took their money and a lot of other people's money and skipped the country.

He had impeccable credentials and excellent references & had been around for a good number of years.


You just never know these days.....

Larry Browning
05-30-2014, 7:52 AM
I am not sure how this thread turned into talking about investments. I thought it was about deciding on how and when to start getting social security distributions. My suggestion was to try to find a professional advisor who could explain how it all works and give some recommendations. No where in there did I ever suggest that I would want to give this person money to invest for me, just pay for some advice about SS distribution.

Pat Barry
05-30-2014, 8:07 AM
May want to check out the SSA website. Their calculator looks interesting.
http://www.ssa.gov/estimator/

I used their calculator and for me, the breakeven point (same total payout whether I retire and draw benefits at 62, 66, or 70) is about age 80. This makes sense to me because SS is basically an annuity payout structured to typical life expectancies.

Here is an example payout structure which I calculated based on some fictitious info but scaled according to the actual payouts.
290341

I don't think though, as others have said, that this is about maximizing your total take from SS. Its a question on whether you can live or supplement your living on the SS payouts you get monthly. If you have retired, then it seems logical to start taking the payouts and not waiting.

Larry Frank
05-30-2014, 10:37 PM
Talking about how and when to take social security can not be thought of in a vacuum just based on those numbers. It needs to be looked at in conjunction with your other investments, income, liabilities and needs. It is not an independent item when planning retirement.

Whether you use an investment adviser for investments or not, a good one will be well equipped to help evaluate your situation and if you need to take the social security at 62 or some later date. There are very few people who are capable of doing all the retirement planning on their own. It would be like someone trying to build a complex piece of furniture for the first time without any help. Getting advice and ideas and then evaluating them is essential. Making a mistake at this point of your life is one that you can not easily recover from except by going back to work and in this job market not easy.

Yes, there are bad investment advisers just like there are bad doctors and bad anything else. We spend our entire lives trying to figure out who to believe and who not to believe. In my opinion, finding a good adviser is important and one should spend the time to find a good one.

My wife and I have spent a lot of time doing the planning and talking with people including a very good financial adviser. I have learned so many things that I did not know or did not realize that it left me a little stunned at times.

Scott Donley
05-31-2014, 5:07 PM
Also keep in mind that SS is taxable over a certain amount if you have income from other sources.
https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=2117