Author Topic: Social security benefits calculator  (Read 4854 times)

Workinghard

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Social security benefits calculator
« on: July 09, 2014, 09:31:58 AM »
So I went to the T Rowe price website for SS benefits.
http://individual.troweprice.com/public/Retail/Retirement/Social-Security-Tool?WTAFeaturedResult=Social%20Security

I put in information for myself and my husband. The following options were available.

1. We want to claim our benefits as soon as possible, even if they're smaller.
2. We want to get the maximum benefit possible as a couple-over both our lifetimes.
3. We want to maximize our income over the years we have together.
4. we want to minimize the drop in income for surviving spouse.
5.  We want the surviving spouse to receive the maximum annual benefit available.
6. We want to maximize the survivor benefit and also receive income early if possible


The results for 2, 3, and 5 were the same as far as estimated cumulative benefits based on age 95 for me and age 83 for him.

Choosing option 1 meant $259,984 less than option 2, 3, 5.

Choosing option 4 and 6 resulted in an increase of $14,991 over option 2, 3, and 5.

Based on the above, option 1 is out. It looks like option 4 and 6 are the best based solely on cumulative benefits.  Sigh. I'm sure there's a difference if I started breaking it down into years and figuring out the probability which is beyond my math scope. I'm not sure that it would make that much difference though n

Cheddar Stacker

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Re: Social security benefits calculator
« Reply #1 on: July 09, 2014, 10:14:57 AM »
It's an interesting exercise to go through, but the biggest variable is the most impossible to predict: longevity.

Option 1 looks terrible due to your 30 year time horizon. Change your ages to 85 and 73 and see what happens. I bet Option 1 looks a lot better then.

In the end it's a guessing game since you can't predict your demise. You are simply betting the over/under on the actuary tables. If you're healthy with good genes avoid Option 1, but otherwise it might be your best bet.

Workinghard

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Re: Social security benefits calculator
« Reply #2 on: July 09, 2014, 10:58:29 AM »
Unfortunately, I didn't see an option to change our ages. It's was 83 and 95--maybe due to our current ages. Since I'm the female, and younger, and in better health, I picked 95 for me. :)

Option 1 has my husband filing for benefits this year at age 63. He's still working and will continue ue to do so until eligible for Medicare. It has me filing at age 62, in 2019.

It drives me crazy trying to figure out the best way to go, along with rolling over his 401(k) into Roths once our income drops. Currently we are in the 25% tax bracket. My income is 61k a year not including overtime. Thus it may not even be worthwhile doing rollovers until were both on Social Security. By that time, he'll be close to RMDs. Argh!

Cheddar Stacker

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Re: Social security benefits calculator
« Reply #3 on: July 09, 2014, 12:03:29 PM »
Good luck figuring it all out. A little light reading if you haven't seen this yet. If you finish this and want more read the comments. There's a link to a great post by jlcollins on the same subject along with some other good points worth considering.

http://www.gocurrycracker.com/social-security-and-early-retirement/

Workinghard

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Re: Social security benefits calculator
« Reply #4 on: July 09, 2014, 12:38:10 PM »
Good luck figuring it all out. A little light reading if you haven't seen this yet. If you finish this and want more read the comments. There's a link to a great post by jlcollins on the same subject along with some other good points worth considering.

http://www.gocurrycracker.com/social-security-and-early-retirement/

Thanks!  I appreciate it. I definitely need to go back and revisit the topic even if I have seen it. Our future retirement, although not early,  is becoming a reality vs a pipe dream.  I can't believe we'll hit the 1m NW sometime next spring and will still have a year before my dh pulls the plug. We're putting 72-75k/yr into investments.  Hopefully, we'll have close to 1m liquid when he retires and definitely by the time I retire! We'll be selling our home but haven't decided the timing yet. Most of the apartments seem to be low income housing, so we may not sell unto we're ready to relocate (after I retire).

Cheddar Stacker

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Re: Social security benefits calculator
« Reply #5 on: July 09, 2014, 12:50:31 PM »
Congrats on soon reaching $1M.

So he's 63ish and you're 57ish. And he presumably has a sizable 401K, and has already reached 59.5.

Is there something keeping you from both calling it quits today or next year? Health insurance maybe? Can one of you just work part time to get some coverage? Have you researched the ACA?

Nearly $1M liquid, plus a house. Plus SS coming very, very soon and Medicare not far behind. It seems like enough for most people - not trying to pry just being a sounding board.

The sooner you do it the more you will be able to pull from the IRA (or convert to Roth) with very low taxes. If you wait until after collecting SS to start drawing down you will be taxed heavier on both.

Workinghard

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Re: Social security benefits calculator
« Reply #6 on: July 09, 2014, 01:16:04 PM »
FEAR! I grew up poor, occasionally stole food from grocery stores, yada, yada. Originally he was gong to pull the plug at 66, but we moved it to 65 once he's eligible for. Medicare. My health insurance plan is ridiculous. It will be fine for just me but biweekly rates go from $61 to $362 if he's added as a spouse.

Nearly 1m NW not liquid (sorry). If it was liquid + the house that would do it. However, I do love my job but would definitely cut down hrs and go per diem so I had more "control".

We've be able to do in service withdrawals from his 401k, so have been rolling that to Vanguard. Course it's a regular IRA vs a Roth.

Even though we would save on taxes and be able to convert to Roths, I don't think that would offset what we would be able to save/invest to make it worthwhile?

I appreciate your input. As ignorant, and math impaired as I am, it's a miracle we've made it this far! Lol

Congrats on soon reaching $1M.

So he's 63ish and you're 57ish. And he presumably has a sizable 401K, and has already reached 59.5.

Is there something keeping you from both calling it quits today or next year? Health insurance maybe? Can one of you just work part time to get some coverage? Have you researched the ACA?

Nearly $1M liquid, plus a house. Plus SS coming very, very soon and Medicare not far behind. It seems like enough for most people - not trying to pry just being a sounding board.

The sooner you do it the more you will be able to pull from the IRA (or convert to Roth) with very low taxes. If you wait until after collecting SS to start drawing down you will be taxed heavier on both.

Workinghard

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Re: Social security benefits calculator
« Reply #7 on: July 09, 2014, 02:37:53 PM »
Just went to ACA website:  $859-$1132 for both of us to be insured. I could probably pay more but stopped there.

Bob W

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Re: Social security benefits calculator
« Reply #8 on: July 10, 2014, 08:49:56 AM »
Just went to ACA website:  $859-$1132 for both of us to be insured. I could probably pay more but stopped there.

That seems like a bargain.

 If your pretty tight with your spending, like a lot of Mustachians, my assumption is that you will need very little income to live on.  Maybe 20K if the house is paid off.   

The reason I mention this is that last time I looked at the premiums (with tax breaks) for health insurance the cost was basically close to zero at 25K income.   

This may be an important point for you if you have control of income (not a forced pension).   You could essentially live off your 401Ks until 62 and then live off of SS when it kicks in while basically paying no taxes and no health insurance.  Lifestyle plays an important role for most of us in making choices.   

The 401K/IRA can be passed to grandkids,  while SS cannot.  So, in cases where you have significant assets my choice would be to take SS asap.   

By the way, there are at least 3 ways to make tax free withdrawals from IRAs without tax penalties prior to age 59 1/2.  You can google these.  "Substantially equal withdrawals" comes to mind. 

The other big consideration is long term care insurance.   You might look at the recent thread on that.   Without LTCI there is a significant probability you would eat up your assets.

Another consideration is your home.    Most people don't consider selling and downsizing, but you might.

Here is some math -   Sell a 500K home with taxes net 470K.   Buy a 200K place with a low down and interest only loan at 4%.   Your 470 will net 18K per year at 4%.  Your mortgage would be 8K.   Essentially, your asset would now be producing 10K per year.   Using a 9% average return on the 470K your average annual net would be closer to 32K.  (32K is a nice amount of money IMHO).  This is a strategy for long term thinkers.  (I'm not saying this is your situation.  Although it is for many readers including MMM himself).

By the way,  I don't think the SS calculator takes into account inflation and investment of the funds.  So let's say you take 28K out of SS and just invest it.  In 20 years it will be worth something like 200K.  Do this each year and you're looking at 1.2 million that can generate 36k for you and your decedents indefinitely.

Just thinking out loud -- thanks for you post. 

Cheddar Stacker

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Re: Social security benefits calculator
« Reply #9 on: July 10, 2014, 08:59:04 AM »
Good post Bob

Bateaux

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Re: Social security benefits calculator
« Reply #10 on: July 11, 2014, 10:11:21 PM »
Over the course of my nearly 30 years of paying social security, I've never even considered the possibility of getting anything back in return.  it would be a joy if that happens.  If and when I reach 62 there is no way in hell I'm not drawing.  A program that may run out of money isn't something you want to wait to tap.

Workinghard

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Re: Social security benefits calculator
« Reply #11 on: July 12, 2014, 03:45:48 AM »
You brought up some great points, Bob. We're not near as tight with money as we could or probably should be. However, out biggest expense is charity which is around 1k a month. Without that 25-30k is much more doable. Property tax, insurance, maintenance, increase utilities work out to about the cost of rent.

Thanks for the example with selling and leveraging the money. We're definitely selling!  The timing is questionable. On one hand, selling would make my retirement a little easier as we wouldn't have 250k tied up in our house with a low return. Once we both retire, we are planning on relocating. Subsequently I don't know if moving twice makes sense or if we should just wait until then. We're looking at apartment living. Even figuring an annual increase in rent, our home would probably pay for an apartment for the 30 years. Moving closer to one son will save travel expenses. My dh has mixed feelings about selling/timing but is all for it, if it will enable me to pull the plug sooner.

I've thought about LTC insurance, but I'm going to roll the dice on that one. My brother, with 5m, is my LTC insurance. Plus adult children would help out physically and otherwise.

No pension here. I just know when we quit that's it. We're too old to go back-especially my dh. During his last year at work, he's going to have 100% of his paycheck going to his 401k to max out. Once that's done, and he has Medicare he will go per diem. I am not going to co-mingle that money. I want to see how we do on just my income.

Course when both of us retired, we will go to one vehicle. I know that's not true MMM, but it's better than nothing. I would love to be in a place where we could walk to stores.

Excellent point about being able to pass on 401(k)s and not SS. Seeing it written puts it into perspective. Since I am 57 and my husband is 63, we don't have to worry about the withdrawal rule of 59 1/2.

We have a lot of expenses coming up this year and next. Once we get beyond those, I think it will help. One son is retiring from the military and want to be there for that. Another one will be commissioned as an officer and want to be there for that. The younger one is getting married next year. We have a trip to Europe next summer and another trip in the fall for a family reunion. The only possible negotiable expense is the family reunion. My husband has wanted to go back home to Germany for years and we've put it off for years. We will be traveling with our older son and his family.

I wondered about the calculator with inflation/investing the funds. A coworker is drawing Social Security now and investing the funds and continuing to work. In 2019, we would get approximately 25K a year combined. In 2021, that increases when my dh is 70. Supposedly his benefit would be 34k and mine 15k.  2019 is so close and we could definitely live off our investments until then!

I really, really appreciate your  input. Your comment, and others, have helped me to realize we can do this and it can become a reality. Transitioning slowly will make it easier for me, but I'm so excited. My dh and I are looking forward to this next phase in our lives. I'm beginning to look forward to his retirement almost as much as he is!


That seems like a bargain.

 If your pretty tight with your spending, like a lot of Mustachians, my assumption is that you will need very little income to live on.  Maybe 20K if the house is paid off.   

The reason I mention this is that last time I looked at the premiums (with tax breaks) for health insurance the cost was basically close to zero at 25K income.   

This may be an important point for you if you have control of income (not a forced pension).   You could essentially live off your 401Ks until 62 and then live off of SS when it kicks in while basically paying no taxes and no health insurance.  Lifestyle plays an important role for most of us in making choices.   

The 401K/IRA can be passed to grandkids,  while SS cannot.  So, in cases where you have significant assets my choice would be to take SS asap.   

By the way, there are at least 3 ways to make tax free withdrawals from IRAs without tax penalties prior to age 59 1/2.  You can google these.  "Substantially equal withdrawals" comes to mind. 

The other big consideration is long term care insurance.   You might look at the recent thread on that.   Without LTCI there is a significant probability you would eat up your assets.

Another consideration is your home.    Most people don't consider selling and downsizing, but you might.

Here is some math -   Sell a 500K home with taxes net 470K.   Buy a 200K place with a low down and interest only loan at 4%.   Your 470 will net 18K per year at 4%.  Your mortgage would be 8K.   Essentially, your asset would now be producing 10K per year.   Using a 9% average return on the 470K your average annual net would be closer to 32K.  (32K is a nice amount of money IMHO).  This is a strategy for long term thinkers.  (I'm not saying this is your situation.  Although it is for many readers including MMM himself).

By the way,  I don't think the SS calculator takes into account inflation and investment of the funds.  So let's say you take 28K out of SS and just invest it.  In 20 years it will be worth something like 200K.  Do this each year and you're looking at 1.2 million that can generate 36k for you and your decedents indefinitely.

Just thinking out loud -- thanks for you post.

scrnplyr

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Re: Social security benefits calculator
« Reply #12 on: July 24, 2014, 12:02:38 PM »
Thanks for providing the SS website. The calculator was simple and it was amazing to see my "earnings history" over the past years.

I had to use the Windfall calculator which reduced the benefit somewhat, but wow - it definitely helps to plan things a little better.

again - much thanks for this info.

Aj

Roadrunner53

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Re: Social security benefits calculator
« Reply #13 on: June 23, 2018, 10:41:02 AM »
I am looking for some thoughts on this. A person I know works at a place making a very low income and is barely making it. The person wants to retire at age 66 which will be full retirement age (FRA). However, the income from SS and a tiny pension isn't enough to pay for hardly anything and maybe not even Medicare. I wonder if this person worked till age 70 and 4 years past FRA if the SS check was saved for 48 months if that would provide some kind of a nest egg. I do not know what this person would get in SS payment but I am assuming between $1600 and $1700 a month. I know they could postpone getting the SS check till age 70 but this would be a way to accumulate cash money that they don't have now.

What are your thoughts on this plan?

wenchsenior

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Re: Social security benefits calculator
« Reply #14 on: June 23, 2018, 11:04:14 AM »
I am looking for some thoughts on this. A person I know works at a place making a very low income and is barely making it. The person wants to retire at age 66 which will be full retirement age (FRA). However, the income from SS and a tiny pension isn't enough to pay for hardly anything and maybe not even Medicare. I wonder if this person worked till age 70 and 4 years past FRA if the SS check was saved for 48 months if that would provide some kind of a nest egg. I do not know what this person would get in SS payment but I am assuming between $1600 and $1700 a month. I know they could postpone getting the SS check till age 70 but this would be a way to accumulate cash money that they don't have now.

What are your thoughts on this plan?

ETA: DAMN INTERNET CONNECTION DROPPING OUT MID POST.

:ahem:

I think the typical SS amount is about $1400/mo (my mother was a very low income earner and got ~1200/mo, so her 'take home' is about $900/mo after various medicare amounts were taken out).  I believe that the increase per year for delaying SS is 8%, which is very generous. 

So I guess your friend would have to run the numbers to see if saving the smaller payment for 4 years would equal or exceed the benefit of having ~32% larger SS, when they eventually take it.  Needless to say,
one of the other things to weigh is, will your friend absolutely leave this amount alone in savings/investments for that 4 years while it grows.

Let's assume : 

1200/mo or 14400/yr (taken immediately) versus ~1585/mo or ~19000/yr taken later (~385/mo more)

and a nest egg of

57,600 total saved if taken early.  IF (and this is a big if), this nest egg was not touched and was invested for an 8% return (another big if), it would return $4600/yr or ~385/month.

So numerically, it's a wash IF you don't touch the nest egg and IF you can get 8% return within the required risk tolerance.  However, for most people, it's hard to do those things (especially b/c if you are poor, you are more likely to have to dip into the nest egg at some point).

This is more a question of personal risk and personality in terms of handling money, than a numerical one, IMO.
« Last Edit: June 23, 2018, 11:20:11 AM by wenchsenior »

Roadrunner53

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Re: Social security benefits calculator
« Reply #15 on: June 23, 2018, 11:14:02 AM »
This person used to make good money for many years so I think they would collect at a higher amount of $1,600-$1,700 a month. They fell on hard times and had to take a crappy job and is age 65 now so no way to get a better job at this point.

So at let's say $1,700 a month times 48 months would be $81,600. Not a fortune but helpful.

I am curious on what ways it could be invested to make it grow fast but safe.

wenchsenior

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Re: Social security benefits calculator
« Reply #16 on: June 23, 2018, 11:22:47 AM »
This person used to make good money for many years so I think they would collect at a higher amount of $1,600-$1,700 a month. They fell on hard times and had to take a crappy job and is age 65 now so no way to get a better job at this point.

So at let's say $1,700 a month times 48 months would be $81,600. Not a fortune but helpful.

I am curious on what ways it could be invested to make it grow fast but safe.

That's the rub.  Risk and reward usually go together.  And 'safe' investments do not typically yield 8% (except in a higher inflation environment, when again it becomes somewhat of a wash).

ETA: In terms of raw numbers, if you could invest the lump sum and get a consistent growth rate of >8% over time, it would be better to save the lump sum.  But that usually means the money needs to be in stocks, and is thus subject to the vagaries of market ups and downs. 

The other thing to consider is that if your friend takes SS right away and keeps working for those 4 years (as I assume they will need to), then part of the SS might become subject to taxation, so that would have to be factored in as well if it applies.
« Last Edit: June 23, 2018, 11:29:01 AM by wenchsenior »

DreamFIRE

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Re: Social security benefits calculator
« Reply #17 on: June 23, 2018, 12:25:20 PM »
The other thing to consider is that if your friend takes SS right away and keeps working for those 4 years (as I assume they will need to), then part of the SS might become subject to taxation, so that would have to be factored in as well if it applies.

Due to the income thresholds not being indexed to inflation since enacted in 1983, more SS dollars are taxed each year as SS benefits are indexed to inflation while the formula for determining how much is taxable is not:

https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/msg2031636/#msg2031636

If you're looking quite a few years down the road, it becomes more significant.

Roadrunner53

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Re: Social security benefits calculator
« Reply #18 on: July 11, 2018, 06:51:11 AM »
Can some of you read this article. It is a year and a half old but an interesting suggestion on taking SS 6 months earlier than FRA. Scroll half way down to see why Ed should start taking SS 6 months before he turns his full retirement age. Do any of you believe this makes sense?

https://www.creators.com/read/your-social-security/01/17/turning-66-in-2017-consider-filing-for-benefits-this-month

DreamFIRE

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Re: Social security benefits calculator
« Reply #19 on: July 11, 2018, 04:53:38 PM »
Can some of you read this article. It is a year and a half old but an interesting suggestion on taking SS 6 months earlier than FRA. Scroll half way down to see why Ed should start taking SS 6 months before he turns his full retirement age. Do any of you believe this makes sense?

https://www.creators.com/read/your-social-security/01/17/turning-66-in-2017-consider-filing-for-benefits-this-month

That was because Ed was going to keep working into the year he reaches FRA, so he could take advantage of the "lenient earnings threshold" to claim higher benefits while still working.  If you're planning to FIRE long before your FRA, then that provision is irrelevant.

DreamFIRE

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Re: Social security benefits calculator
« Reply #20 on: July 11, 2018, 04:59:27 PM »
I believe that the increase per year for delaying SS is 8%, which is very generous. 

Yes, plus COLA adjustment, based on CPI-W.