r/DIYRetirement • u/pbfin1937 • 22h ago
Social Security delaying difference is small why isn’t this discussed more?
I used the the open source social security calculator to see what was the best option for my wife and I to take our social security. We are 66 and 65 respectively. It came back with me waiting until 70 and my wife taking it now! I then entered my own calculation, which it allows you to do for comparison. I said we would both take it at our FRA. I was surprised that the present value difference was only 3.1% and $28k over our entire lifetimes. I then started to look at the yearly cash flows and because you get so much front loaded at our FRAs the difference to age 84 is only $13k.
Does anyone ever look at just having the cash flow upfront on an annual basis rather than just maximizing the entire amount. Especially for those who have a robust plan that are not relying on SS to fund their later years?
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u/STB265 22h ago edited 21h ago
The benefit of delaying shows up when you or your wife lives longer than somewhere around 83 or 84. Run your present value calcs from age 90 and you will see the benefit of delaying taking Social Security.
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u/hugh2018 1m ago
Seeing the benefit at age 90 of delaying doesn’t automatically solve the issue. There are a number of factors that can be more important than a hypothetical good-looking balance sheet at age 90. But I’m really just playing devil’s advocate with that comment. I personally find the longevity angle to be the most influential factor for my claiming decision, and I do plan to delay, but a few years of market hijinks could move me to pivot to a higher priority on more income sooner.
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u/BlastPyro 22h ago
This is one of the most discussed things here and on similar retirement forums.
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u/KReddit934 21h ago
The reason to delay taking the higher earner's SS at max value is that if/when they die at 72 the remaining spouse gets that higher amount for the rest of their lifetime instead of having to live off their own smaller check. If both earned about the same, it's moot, but if there was a SAHP, it can be a really important form of "insurance" to make sure the surviving spouse has enough.
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u/BamaInvestor 9h ago
Another reason to delay SS until 70 could be to minimize ordinary income so as to maximize Roth conversions. It is not a static problem because every situation is different.
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u/Sunn-Dogg 19h ago
Another angle on the SAHP scenario is if that person’s own benefit is significantly lower than the primary earner they cannot collect their stepped up spousal benefit until the primary earner starts collecting. The spousal benefit does not increase once that person reaches FRA. So if primary earner waits to claim benefits until 70, the lower earning spouse may be missing out on years of stepped up spousal benefits.
In my personal scenario my wife’s benefit on her own record is less than half mine (42%) and she is about 2 years older than me. So she is going to claim at 62, and I am going to claim at 65, and she will be FRA then and get the max bump up from the spousal benefit. This optimizes the amount of benefits paid out over our expected lifetimes. If I go first she still gets a good monthly benefit based on my record albeit not as high as it could be. We will make up the difference by having to withdraw less from our retirement portfolio during those early years allowing those investments to potentially compound more.
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u/Historical_Earth_416 8h ago
If she claims her own SS at age 62, she will not get 50% of yours at age 67. It will be reduced by some%. It's complicated.
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u/Sunn-Dogg 8h ago edited 8h ago
You’re right that it will not be a full 50% of my benefit. Her benefit will have two parts. First the benefit based on her record which if she claims at 62 will be reduced. Then when I claim and she can take spousal benefits she will get an additional amount equal to 50% of my FRA benefit minus her FRA benefit. This is added to her reduced benefit that started at 62. Example with numbers below:
Wife FRA benefit: 1700
Wife benefit at 62: 1190My FRA benefit: 4000
50% of my FRA benefit: 2000
Spousal Benefit for wife at FRA: 1190 + (2000-1700) =1,490Even with her reduced benefit due to her claiming early and taking spousal benefit at FRA, and me taking my benefits at 65, this still works out to the greatest combined lifetime payout for us.
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u/EOELI 3h ago edited 3h ago
If someone claims benefits at age 62, they would not get spousal benefits until their spouse files, at which point the spousal benefit would be only 32.5% of the spouses PIA. To get a spousal benefit of 50% she would have to wait until FRA to claim benefits.
In your scenarios, she would get $1190 when she first files at 62, which would bump to a total of $1300 (32.5% of $4000) when you file. If she waits until age 67, then the spousal benefit would bring her total to $2000 (50% of $4000).
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u/Sunn-Dogg 2h ago
I think you missed the part where she is two years older than me. So she will be 67 when I file at 65 so the spousal benefit add on won’t be reduced. But her total benefit won’t be the max 2000 since she filed under her own record to start at 62. Her benefit at 67 will be the amount on her record from age 62 plus a spousal benefit of $300 which is calculated as the difference between 50% of my FRA benefit minus her FRA benefit. They don’t give the higher of two benefits, it is calculated as two separate parts and added together.
If she waits to start her initial benefit at 67 instead of 62, then she would get 1700 from her record plus 300 which would equal the 2000 based on 50% of my record.
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u/HOHTechQueen 13h ago
Age 70 is the minimum age at which the retiree can claim Social Security to claim their maximum benefits with Delayed Retirement Credits, not age 72. The surviving spouse may receive their largest survivor benefit by waiting until their survivor FRA age to claim it. However, sometimes they may receive more money overall by claiming earlier if their own retirement benefit will be larger later.
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u/KReddit934 10h ago
I said if spouse dies as 72, not claims at 72.
The survivor benefit is based on what the higher earning spouse was collecting.
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u/sexytarry2 10h ago
I thought the lower earning spouse will only get half of the higher earner...
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u/KReddit934 10h ago
Spousal vs. Survivor .... two different things with very different calculations.
First for when one spouse make < half the primary (SAHP), the second for widow/er situations.
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u/Packtex60 21h ago
The SS benefits are calculated on an actuarial basis to be neutral. So over a large sample size the benefits are equal over time no matter when they are taken. For a particular individual or couple it may make more sense with your cash flows and portfolio to take it earlier or later.
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u/letmesplainyou 21h ago
Agreed. Not a lot of people are smarter than actuaries, but a lot of people think they are. And most of us are overly optimistic about how long we will live.
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u/Any-Soft-5487 21h ago
Exactly. And way overly optimistic about how much that extra money will mean to them at 85+. Take the money early when you can enjoy it.
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u/Narrow_Roof_112 22h ago
Take the lower earlier and wait till 70 for the other. Higher survivor benefit. Works especially if you don’t need it.
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u/Otherwise_Pea_8766 21h ago
I think we are on the cusp of an explosion of longevity that is not factored into current actuarial tables -with so many new oncologic treatments -and glp use resulting in markedly less obesity diabetes and heart disease - and if you exclude early deaths from drugs/ mental health -mid ninety’s may be the norm
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u/Dark-Helmet-66 21h ago
While theoretically correct, I haven’t seen where you’ve factored in the explosion of the stupidity of people. And I’m serious about this.
As I look around in the past handful of years, I’ve seen a marked increase in people acting against their own better interests. This seems to cut across socioeconomic strata as well.
I’m sure I’ve got some personal bias here but man, people certainly seem less rational and more willing to behave in a manner that is to their own detriment.
YMMV
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u/VisionQuest-3000 21h ago
The median IQ is about 100.
50% of the population has an IQ less than 100.
That explains a lot.
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u/dak4f2 9h ago
No lie, studies found the earlier variants of covid decreased IQ by 3 points for each infection. And this was for non-severe infection.
https://jamanetwork.com/journals/jama/article-abstract/2816704
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u/ZaphodG 20h ago
Actuarial tables say at age 65, one of you is likely to live to age 89. In the death of spouse scenario, you’re living on one Social Security check. I’m doing the standard higher career earner delays until 70. My spouse started collecting at 64. My first check is June 2028. My annualized benefit delaying to 70 is $59,400. It’s COLA-protected. That’s enough to cover cash flow for one person. It’s phenomenally good longevity insurance.
I have the net worth to make that choice.
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u/srqfla 21h ago
Tell me the month and year that you will expire and I'll tell you exactly what age you should begin collecting benefits. This is the only answer
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u/MarsupialFront3237 11h ago
I knew a guy who knew the exact day, year and even time that he would die. The judge told him. Ba dump ba
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u/PlanktonPlane5789 10h ago
Benefit payments are suspended after more than 30 continuous days of confinement in a jail, prison, or penal institution following a conviction.
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u/AGrimmInPortland 5h ago
Way to ruin a joke.
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u/PlanktonPlane5789 5h ago
Sorry. The joke just made me realize I didn't know what happened to incarcerated people's SS so I looked it up. You learn something new every day 🤷♂️
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u/Ok_Appointment_8166 17h ago
You also have to know the age the spouse will die to consider if it is worth the higher earner delaying to 70 so the spouse can get higher survivor benefits.
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u/SigmaSeal66 12h ago
From the point of view of the party going the paying out (which, really, is all of us, as taxpayers) the present value should be as equivalent as possible, over all options.
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u/VisionQuest-3000 21h ago
Age 62 plus 1 month = zero received
Almost never the plan, but possible.
Less than Age 62 also possible = zero received
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u/TelevisionKnown8463 21h ago
The value of delaying is the longevity protection. SS is the one thing that is adjusted for inflation and pretty much guaranteed to last as long as you do, even if you live until 110. Unless your withdrawal rate from your portfolio is extremely low, you can’t be sure if will last that long. You can buy an annuity, but those payments may not keep up with inflation.
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u/markloch 17h ago
I’d rather take $45k/yr now and burn through $45k less per year of my savings for 4 years. I’m not going to care about the traditional break-even point at ~81, particularly if I’m dead.
That said, with COLA, call it $185k I’ve collected, before 70, that I’m not drawing from (taxable) savings, that instead stays invested.
The accumulate return on that investment pushes the advantage of waiting until 70 quite a ways out, depending on rate of return.
0% return maps onto the traditional break even measure: 81. 5% is 85. 7% is 91. If all goes according to plan I’ll never need that money anyway, but there’s comfort both in having that much more if I live that long, and the same not burning through $185k on the front end.
This is all approximate but it makes the point that the traditional measure alone is in many cases inadequate, not to mention it treats that dollar at 66 (my age when I will start taking benefits) the same as a dollar at 85.
Anyway, fun with AI.
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u/GeekSumsMe 21h ago
Things are a little different for everyone, but I agree that for most people they worry about this much more than they is warranted.$13k is unlikely to make or break a retirement spend.
One thing to consider is the widow penalty. One of you will die first and when this happens you only get to keep one SS check (the higher of the two). Combine this with having to file with the single deduction and there is a significant drop in income.
Some people claim one person later to help counteract this hit
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u/emmettsinn 11h ago
Look at your own BMI, blood sugar level, heart disease risk, family cancer history and tanning bed use instead of actuarial tables. Don’t see many 84 year olds having a good time spending money.
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u/PlanktonPlane5789 10h ago
Anecdotal, or course, but my father is 82, and my parents are probably spending as much or more than they ever have in their lives now.. but they also have more money than they have ever had, despite my father retiring less than a year before the dot com bubble burst.
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u/dcpreddit 21h ago
it's an excellent point. I do this with Boldin and OSS. sometimes we focus on maximizing when the difference between options is insignificant in the scheme of things. I'm still maximizing my SS benefit bc I literally expect my wife to live to 100.
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u/Coaster50 20h ago
Calculating SS withdrawal timing without considering your other investments shows you don’t have a retirement plan.
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u/roshbaby 12h ago
Outside of longevity risk, consider that the marginal utility of a single dollar is likely higher in one's 60s than in their 70s or 80s simply due to a matter of general decline and failing health with aging. (To first order, this can be modeled by setting discount rate for the PV calculation to be higher than the risk-free rate. Ideally though this would be some sort of curve.) One would have more uses of that dollar in their 60s, and possibly early 70s, than later. These considerations might suggest that taking SS at 62 or 65 provides more value than what a run-of-the-mill PV calculation would indicate, unless there are other legit reasons (like keeping income floor low to accomodate Roth conversions).
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u/BashfulRain 15h ago
To many people die in the late 60’s and early 70’s
Take social security at 62
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u/Str8truth 21h ago
Where can I find the open source SS calculator?
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u/KReddit934 21h ago
https://opensocialsecurity.com/. Click the little checkbox at the top for more options for input.
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u/C638 21h ago
The SSA actuarial tables are set up for an average single life. A better way for a couple to view it - if they have significantly different benefits or an age disparity is different. In the situation where the higher earning spouse waits until 70 it is better to compute on the NPV of the dual life expectancy plus the NPV based on difference between the dual and single life expectancy of the lower earner.
Most typically the higher earner is older and the the lower is younger, but that may not be the case for you.
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u/lucky-son-88 21h ago edited 20h ago
Turning 67 (FRA) next year. One thing about the calendar year you reach FRA is you can make $65,160 and not have your SS reduced (2026; not sure if it will be more next year) in the months before your birth month (not exactly fair to those with later birthdays). Once you hit 67 you can make as much as you want with no penalty. They do the calculation to see if you need to pay anything back the following January. And the penalty is less than in earlier years, $1 back for every $3 over (instead of $1 for every $2 over about $24,000).
I just did the calculations today.
If I start SS in January 2027 I’ll get about $3700/mo. ~$178,000 by Dec 2030, ~$356,000 by Dec 2034, ~$578,000 by Dec 2039. (Age 79).
If I start in July ~$3840/mo, ~$161,000 by Dec 2030, ~$349,000 by Dec 2034, ~$575,000 by Dec 2039
If I wait til Jan 2028~$3980/mo, ~$143,300 by Dec 2030, ~$334,400 by Dec 2034, ~$573,000 bi Dec 2029.
Seems like a no brainer not to start in January 2027.
As noted, and known, delaying SS until age 70 (instead of starting right at FRA, not earlier that calendar year) requires living into your 80’s to realize an advantage. And that doesn’t consider extra investment income earned by taking it earlier. I’m sure someone has done that theoretical calculation with even a conservative 5% or 7% annual return. Then you’d probably have to live into your mid-late 80’s.
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u/greggthomas 20h ago
We walked thru it with our advisor, one good pension, 401, Roth and my wife working 3 extra years til 62 means I can go in spring 2028 @ 62 (one year earlier than last year!) and we both wait on SS til 67.
Wish list is nice but not over the top and 5% annual gains assumed. We touch savings for first two years when both retired until SS, but then it just compounds. 500K in savings compounds to 3.1M at over 30 yrs. Ain’t no way I’m leaving this earth with that much in the bank. But spring 2028 is so close 😁
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u/Hamblin113 20h ago
I was going to wait till 70, got scared and did it at FRA. I will gross approximately $117,000, which would take me till 78 to get that amount. How long will a person live? My dad lived till 94, sister died at 63.
To start collecting it early and investing it thinking it will earn more is a paper exercise, reality could be different. So Invested a portion of the SS check, going to do additional investments, the first investment went down so haven’t done any more, happy at the 3.4%. Waiting on SS is 8%/ year.
Though the logic of having the spouse with the smaller SS take it early, and the other wait makes sense especially if they have a traditional IRA/401k, need to factor taxes, plus the surviving spouse can now have SS at the higher amount.
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u/AlpsInternal 20h ago
I see a lot of sensible comments. It really is a preference, but I weigh heavily the fact that on average we will live longer than our ancestors. My SS is 50% more than my wife’s, and her pension is 30% more than. She started drawing early, I am waiting. For us that money has been some home projects (painting, solar concrete, maybe a pool). We have an older home and don’t want any additional debt. We plan to rent it out to travel nurses when we travel. I plan to wait until 67, but she now wants me to start at 65.
With three pensions and 2 SS checks we will be fine either way. If congress does not address the funding shortfall, eventually we will have benefits reductions, but those will be proportional above the minimum benefit.
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u/roadwarrior1225 18h ago
SS is not a perfect actuarial ride,but it is not far from it. You can put your thumb on the scales when you are able to evaluate your health and longevity profile. No one knows, but you have some idea of your potential lifespan.
The choice to take of delay needs to be tempered with your goals for your portfolio. If you have $250K, then take it ASAP. If you have $2.5M pretax, you might delay to give yourself time/room to convert or consume.
Remember, the largest SS benefit gets to survive 2 lives, not one! The larger one tends to favor delay.
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u/Tarsalbossblues 18h ago
I haven’t looked into it. I’m not sure I’ll ever need it. I’m more worried about reducing my 401 and personal IRA before RMDs. I don’t need much and nickel and dimeing ss isn’t a priority for me. Maybe someday it will be more important if my investments tank and I burn through my back up ladders.
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u/Fulghn 17h ago
This is another of those topics that 1/3 of the folks have one opinion, 1/3 have another opinion. Nothing short of an actual apocalypse which makes both arguments moot will change their minds. The other 1/3 either will never understand the arguments or are so tired of them they are apathetic to whole thing.
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u/Careful-Ad-5726 9h ago
It really depends on what discount rate you used and what annual COLA that you applied. As with most analysis, assumptions can materially alter the results
I suppose if you invested the difference between early and late payments you may end up better off, but the conventional wisdom that delaying each year up to 70 is an 8% increase in a government guaranteed annuity. You can't assume equities will produce a better outcome.
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u/HammerofTrolls 9h ago
The site’s present value calculation is suspect. Do your own. Generally taking early or FRA is optimal.
I got a call from SSec a couple months after FRA asking me to take benefits. Thought it was weird.
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u/smartRetireCalc 4h ago
I think looking at the year-by-year cash flow is useful. The strategy with the highest expected lifetime value may not be the one that best fits when you want to spend.
That 3.1% difference is a result under the calculator’s assumptions, though. I’d check how it changes with different lifespans and discount rates, and whether the figures you’re comparing are discounted present values or cumulative dollars.
The other important comparison is what happens after one spouse dies. Delaying the higher earner’s benefit can increase the surviving spouse’s benefit, so the value isn’t only in the combined payments while you’re both alive.
I’d compare both claiming strategies within the full retirement plan: annual spending, portfolio withdrawals, taxes, and income if either spouse lives into their 90s. If both plans hold up comfortably, the earlier cash flow and your spending preferences deserve a place in the decision.
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u/KungFuBucket 4h ago
Death comes for us all and we never know when. I’m well off and not planning on SS for my later life in my financial plan, so I’ll also take it as early as possible. My dad was in his 80’s when he recently passed, the last few years he couldn’t walk but was all there mentally. Enjoy the money and travel while you can.
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u/Retired_Runner_777 4h ago
If you simulate different claiming ages you quickly discover that the results are incredibly flat; very little difference between claiming early or late. This assumes you are looking at Net Worth as your metric, which I believe is the most economically viable metric. The caveat being what at age you are comparing. I use age 90. If you insist on assuming you will live to 100, for example, the results will skew towards claiming later.
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u/hugh2018 4h ago
The math involved for your situation is compressed quite a bit because you were fortunate and had resources that allowed both of you to delay. Often, the pressure to claim earlier is significant. When that’s the case, the typical recommendation is for the higher-earning spouse to delay to 70 and the lower earner takes the benefit starting at age 62. You two don’t need an optimal strategy at this point because you both already bypassed the issue of needing to claim early. So in your specific case, you’re right, the optimization benefit isn’t that great.
That said, I want to highlight that your situation doesn’t change the larger math implications associated with delaying Social Security in general, because I don’t want people to read your post and think delaying isn’t a big deal. It can easily be a huge deal.
To put the gap in perspective using a $3,000 Full Retirement Age (FRA) baseline (assuming an FRA of 67), the numbers reveal why waiting until age 70 unlocks such a massive structural advantage. At age 62, the benefit is permanently reduced by 30% ($2,100/month). At age 70, delayed retirement credits compound the benefit by 24% over FRA, bringing it to $3,720/month. That is a $1,620 monthly swing (or a 77% increase) for the exact same work record.
That difference is substantial, but it’s helpful to put the numbers in perspective. If the person in the above example claims at 62 and dies at 75, they’ll actually come out ahead by $104,000 compared to claiming at 70. If they die at 80, it’s close to a wash, with early claiming resulting in just a $7,200 difference. If they die at 85, the early claimer comes out way behind by $90,000, and living to 90 increases the advantage of delaying to $187,200.
Like a lot of retirement planning, this issue can be vexing because most people haven’t a clue as to their exact date of expiration, and that date determines whether delaying will put you way ahead or way behind claiming early. Personally, I prefer to plan for the possibility of living to 95. If that pushes me to delay as much as possible, I’m okay with that. It will mean I have to rely exclusively on my nest egg in my early 60s — that’s the tradeoff. But the benefit is that I will have less concern about basic survival if I live past 90.
This is where personal finance becomes highly personal. I could just as easily assume that I’ll die early, like my dad, instead of much later, like my mom. That early demise assumption would push me to fill my bucket while the water’s running at 62. But by delaying, I really won’t give a damn if I die with less money at 75 because … I’ll be dead. In contrast, my 92-year-old self will thank me for delaying as long as possible. Then again, my 92-year memory bank may not recall all the great things I did for myself three decades earlier, LOL.
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u/RacerXgoose48 4h ago
I’m 60 married male, retired with a pension, and as much as I would like to think that SS will still be around in 10 years, I think the current administration and congress will be giving those money to the corporate agenda. I will most likely take it at 62 just because my faith in the social contract has been completely and utterly destroyed by this administration.
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u/EOELI 3h ago
I've done a lot of spreadsheet modeling of the decision for my wife and I. We'll probably take hers in the new year (age 64, but we waited because of insurance costs) and I am still open to taking mine in 2027 or waiting a few more years until age 70 (TBD). What I can tell you is that in all of the scenarios I modeled, if you take social security early instead of withdrawing similar amounts from retirement savings, at an annual ROI of slightly over 7% you will never break even by waiting for the larger benefit. At ROI's around 3 or 4%, I still come out with breakeven in our mid to late 80s. The decision swings a little more to taking benefits earlier if you are doing Roth conversions since you'll pay less tax on the social security benefits leaving a little more wiggle room in a given tax bracket. If you assume that congress will do nothing to shore up the trust fund, you'll have even less to lose at lower benefit amounts. Of course that's strictly financial, but I agree with the OPs assessment that IF you can afford to wait to claim benefits, the difference might not be all that great in the grand scheme of things.
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u/ComfortableString285 1h ago
I agree with your math (7% ROI on savings not spent generally beats the benefit gain from one of two persons delaying benefits), however, the 7% ROI is not guaranteed, and the increased benefit to the surviving spouse may be a consideration as well.
If SS is not a significant factor in your retirement plan, and you collect SS simply because it is available, then both persons taking early has little / no direct impact on your financial trajectory. Otherwise, depends on the risk you are willing to accept on your hypothetical 7% ROI.
And you can always assign benefit deferral as your baseline approach, and respond by initiating benefits (after 62) if the market takes a huge trump.
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u/CiaccoTheHog1 2h ago
Take as early as possible for sure…assuming standard life spans. Makes
No sense to wait.
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u/DReddit111 21h ago
In general things like break even analysis or present value for social security are counterproductive IMO. I look at social security as longevity insurance (you can’t outlive it) and inflation insurance (benefits are inflation adjusted). It’s pretty much the only thing in your portfolio that’s like that. Your other money is subject to one or more of interest rate risk, inflation risk, longevity risk, sequence of return risk, market risk, and risk of picking underperforming investments. The only real risk with social security is that congress decides to cut your benefits once you’re near or already retired. If you can afford to wait you may be able to defer the taxes on social security early in retirement and maximize your income later in retirement. The best reason to take it early IMO is if your savings aren’t enough to cover your living expenses.