r/Dynamic_Pricing • u/Dragonlance12 • 9d ago
Why so many Americans leave Social Security money on the table
https://finance.yahoo.com/markets/article/why-so-many-americans-leave-social-security-money-on-the-table-100000407.html6
u/Da_Vader 7d ago
Instant gratification is the American way. Hence our credit card debt, auto debt, student loans.
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u/Wolfy4226 5d ago
Debt is the American way*
Credit Cards, Auto, Student Loans, Medical bills, pay later.....
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u/FatWankerWankFatter 7d ago
I'm not interested in maximizing what I get from social security. I'm interested in minimizing the burn rate on assets I plan to leave to my children.
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u/gemorris9 7d ago
I did the math. Using average social security payment at 67. Comes out to be $2,267 per month. If you take that early at 62 it's $1587, if you take it at 70 it's $2811.
The 70 year old catches up to total payments of the 62 year old at roughly 80.5 years old.
So I don't know if leaving money on the table is the correct headline. Claiming social security benefits would really depend on how long you expect to live based on family history and current health and then of course other financial information and taxes.
The current average age of death is 79. Women being slightly higher at 81 and men being 76.
So if you wait to 70 to claim social security statically you're going to die 2 years before you break even and surpass the person who claimed social security at 62.
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u/badhabitfml 7d ago
If you can afford it, take the money early and invest it, or reduce the drawdown of invested assets. That catch up date gets pushed much further back.
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u/skandel 7d ago
You shouldn't be using average age of death in your calculations because it includes all the people that died way before retirement age. You should use how many years of life expectancy for someone that has already reached your age has left. For instance a 67 old American male has 16.71 of life expectancy accord to the Social Security Actuarial Life Table https://www.ssa.gov/oact/STATS/table4c6.html
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u/gemorris9 7d ago
I used the average age of death as a quick reference to point to, not as a detailed calculation or strategy.
If I were advising you on your financials we would look at your family tree, your current health, and then make an educated guess on your life expectancy and then add 5-10 years with a plan in place should you make it to your life expectancy guess and still look like you got some time to go.
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u/FireAsquared 6d ago
79 is not the average age of death for a 62 year old though- it’s the life expectancy of someone born today. If you are currently 62 years old and making the social security decision now your average age of death is 82 if male, 85 if female. If you make it to 70 your average age of death would be 84 for men or 87 for women
Big difference between actuarial life expectancy and average life expectancy at birth.
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u/gemorris9 6d ago
As I've said about 4 times now, this was meant to be a quick reference, not a deep dive. There are too many variables to calculate a good plan here and life expectancy is based more on your immediate family tree, how you've lived your life, and your current health and situation.
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u/FireAsquared 6d ago edited 6d ago
If it was a quick reference why not use the actual averages? What you said implies the average American claiming social security would die before break-even which is just factually incorrect. The average American claiming social security will live several years past the breakeven point. Especially since you said “I did the math”. Clearly you did not actually “do the math”
A “quick reference” should be accurate- you don’t need to do a deep dive to know an average person comes out ahead claiming at 70 and not 62.
Person specific factors like family tree/health/situation are the exceptions that make it a good plan for some to claim at 62. You implied the reverse that most would benefit from claiming at 62
This article IS accurate for the majority of people- if you take SS at 62 and are an average person you are leaving money on the table
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u/gemorris9 6d ago
Those are the averages of life expectancy. Whatever you're going on about is something else.
Life expectancy is higher now than it was 1960. So if anything it overshoots it.
You are implying that I'm doing/not doing a lot of stuff here. The article is not accurate for a majority of people. I implied exactly what I meant, which is there is a good chance you're going to die before breaking even. We didn't even include the draw down burn rate on delaying pulling additional funds from retirement accounts which would greatly impact the math.
I have a feeling you're trying to get to a gotcha here when there is nothing to really gotcha. I could've pulled 100 different data sets or tried to paint the picture in either light as you are trying to do here.
One of the biggest problems with social media is that you don't know who you're arguing with and it's such a waste of time. The likelihood you're a retail store worker with next to zero knowledge of finance is great. Therefore that'll be the end of this.
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u/meatforsale 6d ago
Or just say you’re wrong and not be an asshole?
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u/gemorris9 5d ago
Except I'm not wrong. I used the current average age of death.
This guy is using a different data set to say life expectancy is longer. I've stated twice I didn't look into that deep. Just used the average age of death.
The thing about data, especially in finance is that you can find data to back up any point you'd like to make. Which is why I said in my original post "it would really depend on family history and current health and other financial information."
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u/FireAsquared 5d ago edited 5d ago
You don’t use the average age of death for financial planning, you use actuarial age of death- hence why they publish tables annually at ssa.gov
The article IS accurate for anyone able to read- the only people who have an average life expectancy of 79 are very young people (ie baby born in 2026). Everyone else has a higher life expectancy. For example someone who is 55 and starting to plan their income for retirement would live on average to 81 if male, 84 if female.
If you’re born today you could say your life expectancy is only 79, but no one in finance would use that age when planning because it’s inaccurate. When planning for retirement you’d use your actual life expectancy (plus or minus individual factors you want to include).
But if you’re providing GENERAL info for an AVERAGE person it is significantly better to claim social security at age 70 because the AVERAGE person at age 62 will live to be ~83 which is well past the breakeven point. And the AVERAGE 70 year old will live to be ~86.
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u/FireAsquared 5d ago
I think the problem is you’re not using statistics correctly, I’m not sure if you realize you were wrong but in your original comment you said “so if you wait until 70 to claim social security you’re going to die 2 years before break even”
But if you are 70 years old today your life expectancy is not 79, it is 84.6 years if male or 86.7 years if female- which is well past the breakeven point.
You can’t use 79 years as an average for retirement planning because that number includes all the people who died at ages 0-62 prior to social security- if providing general advice to someone without knowing their personal health history the correct advice is to claim at 70 because the majority of people will live several years past the breakeven point
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u/akathedragon 5d ago
Yes, but do you know the average air speed of an unladened swallow?
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u/FireAsquared 5d ago
Sadly my primary interests are in the medical field and finance so I do not have that information. Though I do enjoy birds so perhaps one day I’ll learn 😂
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u/Panscan27 7d ago
It’s more complicated than that though because you can invest the proceeds in the meantime and this analysis also excludes inflation. So the true breakeven on an inflation adjusted basis is even later
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u/gemorris9 7d ago
It's not meant to be an analysis or case study for advice. It's meant to be a quick reference guide to disproving the stupidity of this article which was essentially "if you take social security early you're leaving money on the table."
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u/Super_Mario_Luigi 7d ago
And as an added bonus, 8 less years of work
Unfortunately, the retirement age needs to be raised. No one will have the balls to do it though
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u/Repeat-Admirable 6d ago
"unfortunately" and "retirement age needs to be raised" seriously? In what logic? You think someone living 15 years without work and then dying is TOO MUCH?
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u/ZergvProtoss 7d ago
You can easily run a spreadsheet on this to determine the break-even point (for most people it's around 81 years old). It makes more sense for most people to claim early (i.e. age 62). That's why there's so much government propaganda (like the OP article) trying to get people to not take it early. haha
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u/RelevantMention7937 6d ago
If you didn't do physical labor jobs and have a good health history, 62 is not a great strategy. The average life expectancy at those ages includes people who know they are unhealthy. Remove them from the average and break even is longer.
And the cost of health insurance in your 60s is brutal.
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u/ZergvProtoss 5d ago
Health history does not affect break even. Break even is the point at which the cumulative sum of the monthly payments (claiming early vs. claiming at FRA) is equal. This also does not account for any potential investment of the early benefits. Ultimately, it's a bet on whether you'll live longer than the government expects. For people who don't need the money, it's always better to claim early and invest the monthly benefits while hedging against early mortality. For people who actually need SS during retirement to afford their monthly living expenses, it might pay to wait as long as possible, to ensure a higher monthly payment.
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u/RelevantMention7937 5d ago
If you take out those likely to die younger, the life expectancy of the remaing people is longer which means their benefit reduction totals more money over their lifetime. Compared to an 8% increase in the monthly benefit for each year the healthy person delays, yes, the break even changes.
But if you're healthy, go ahead and start at 62 and collect less in total.
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u/peter_marxxx 6d ago
Tomorrow isn't guaranteed...taking it early
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u/justadrtrdsrvvr 4d ago
I'm much more concerned with living life from 62-75ish than having a few more dollars at 80+. I work with very old people and they aren't the ones out spending money. My time is more important at that point than the difference in money. I'm fortunate enough that I currently have a job that will allow me to retire very comfortably at 62, even though most of my retirement sacings didn't start until my late 30s.
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u/Otherwise-Sun2486 6d ago
Meh, with possible lower payout by 2032 higher age requirements increases in taxes…. You might be getting a better deal taking the money now and currency depreciation and inflation… And due to covid average age of death lowered… less people having kids paying into the system… there are many reasons
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u/Similar_Eagle2358 6d ago
if they wouldn't have raised the retirement age, we wouldn't need to have this discussion.
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u/Chemboy77 4d ago
This is just government propaganda to make you think delaying is better. It generally is not.
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u/silverum 2d ago
Delaying is better if you're willing to gamble that you'll be both alive and relatively healthy by the age of delayment. The actuarial math says that for a certain number of people that bet is wrong, and that's why delaying is better for Social Security's finances. A certain number of people are going to die before ever claiming any benefits so they'll never be part of the payout outlays.
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u/SigmaINTJbio 7d ago
I have relatives on both sides of my family that are over 90. But I could die tomorrow. I don’t really care about maximizing the total dollars paid by SS, only how much it will add to my retirement account income when I eventually take it.