Social Security discussion

[InstinctX]

This was more of FYI - for the "younger readers" of Saverocity -- who may not think about SS benefits and how that fits into retirement "strategy/planning":

"on balance, it leans toward those best equipped to wait longer, and the reward is significant.

Indeed, at 70, a worker can qualify for benefits worth about 75 percent more than if he or she had chosen early retirement at 62."​

And also why we need to pay attention to any plans by Congress to change SS benefits, such as raising the age when we can collect SS benefits.

But doesn't it really matter if we start collecting at 62? What is the $$ amount we would lose out on? I personally rather get my money earlier -- 70 or 72 seems "very old" (and who knows how long I'll still be "alive")

I'm all about living in the moment.

For retirement planning: if I wanted to continue my current lifestyle, I assume I would need $60K a year. If I were to retire at 50 with life expectancy of 25 years: I would just need $1.5 MM saved up"

And SS benefits is just icing on the cake?

 

[Matt]

You'd lose 30% of your payment by taking at 62 rather than 67. However, you'd receive that lowered pmt for 5 years more. The breakeven point for taking at regular retirement age (and beyond) skews towards late 70's/ early 80's.

The early/late decision follows a prorated concept. IE you're 30% penalty would phase out until zero at 67 and then start swinging the other direction into a bonus if you elect to delay.


PIA is the base calculation for this which is created based upon your contributions to the SSI fund:

http://www.ssa.gov/oact/COLA/piaformula.html

 

[InstinctX]

Thanks @Matt. It's very depressing to read about seniors that are having problems paying for their prescriptions or even heating bills! How do they end up in that situation? Poor retirement planning?

Personally I see SS benefits are supplement, "icing on the cake." late 70's / 80's sounds very very very old!!! I assume the SS check are pretty small and not worth much. But some senior depend on them...

I do worry about my parents though. They are healthy ... but my late grandmother had a couple of strokes. She did have a in-home nurse aid...but eventually my parents and uncles/aunts had the tough decision of putting her in a nursing home. It was depressing to visit her at the nursing home. I did go visit her 3 x week, sitting with her at dinner. I was hard to see her (who was once vibrant) -- in a wheelchair and having to eat meals that was all soft. She couldn't really speak and but she knew who I was.

 

[Matt]

Thanks @Matt. It's very depressing to read about seniors that are having problems paying for their prescriptions or even heating bills! How do they end up in that situation? Poor retirement planning?

Personally I see SS benefits are supplement, "icing on the cake." late 70's / 80's sounds very very very old!!! I assume the SS check are pretty small and not worth much. But some senior depend on them...

I do worry about my parents though. They are healthy ... but my late grandmother had a couple of strokes. She did have a in-home nurse aid...but eventually my parents and uncles/aunts had the tough decision of putting her in a nursing home. It was depressing to visit her at the nursing home. I did go visit her 3 x week, sitting with her at dinner. I was hard to see her (who was once vibrant) -- in a wheelchair and having to eat meals that was all soft. She couldn't really speak and but she knew who I was.

Yeah. Getting old sucks. Nice of you to visit so much though.

Most planning should go to about 95, people are now suggesting 100 or more, so the upside make sense for some. Women generally live longer than men so that should be factored in.

SS benefit planning is important. There are some very powerful strategies to be used with married couples. For example, one spouse could delay benefits and in the interim claim 50% of the other's SS. That means that they get 150% of benefit while one spouse is building up 'bonus' years beyond 70.

The max is COLA'd and capped at around $2600 per month.

 

[Sesq]

SS is designed to be actuarially neutral accross the broader population. In theory, taking a smaller payment for more years should equal out against taking a larger payment over fewer years. Where it disconnects is you may know that your family has legendary longevity. Or you are facing a terminal disease. It also plays into the the flexibility for enhanced spousal/family benefits (works in either direction depending on the circumstances) by going through an optimization process. Finally, at the end of the day, if you need the money at 62, you take the money.

In my view, in my twenties I assumed SS wouldn't be there when my time comes. In my forties I now can see that it is a cornerstone in not having starving old people. I don't think it is going anywhere, though it is likely to be trimmed here and there to address funding concerns. I estimate a 25% haircut in my models, though I don't think it will be that high.

Medicare is the place where the liabilities are massively underfunded. I also don't expect that to go away, but elements of rationed care will continue to work their way into the system.

If the rules are largely the same I plan to defer claiming to 70, viewing it as a rare inflation index annuity available for purchase. This is also because my wife will likely claim based on my benefits (wage gap, two years younger), so in the event she outlives me she will further benefit from the larger checks.