Social Security Optimization Advice Please

[Shane]

Because we have an underage child, DW can get $1200/month in SS benefits from age 62 to 70. When DW turns 70 our daughter will be 18, and DW's SS benefit will be reduced to $800/month for the rest of her life.

If DW waits until she's 70 to begin collecting SS benefits, she'll get $1400/month for the rest of her life, but we'll miss out on 96 months of $1200/month SS benefits = $115,200. If we decide to take DW's SS benefits at age 62, so that we can take advantage of the $400 extra child benefits, we'll probably just spend all of the money we get from SS, but it'll allow us to not have to withdraw $115,200 from our investments over 8 years near the beginning of our retirement, hopefully allowing that money to continue growing to create even more income for us down the road when we're older.

So, the question is should we take DW's SS benefits of $1200/month at age 62? Or should we wait until DW's 70 years old and then get $1400/month for the rest of her life? Both of my wife's grandmothers lived until their early 90's, so chances are my wife is going to live at least that long as well.

Right now, I'm 49 and DW's 58. We're planning to FIRE at the end of 2015. DW can begin collecting $1200/month in 2019, three years after we retire. The $1200/month will be about 1/3 of our projected spending during retirement. I've run a bunch of scenarios using cFIREsim, and it looks like our portfolio has a better chance of surviving 40 years if we take the $1200/month from 2019-2027. It makes sense that taking pressure off of the stock portfolio early in retirement helps with results.

Since I'm 9 years younger than DW, right around the time when her SS benefits drop down to $800/month in 2027, I'll be turning 62 and be eligible for SS benefits of about $800/month as well. So, if in 2027 the stock market isn't doing well and we need extra money, we could take my SS benefits then, otherwise we could put off taking my benefits for a few years, or until I'm 70, so that we'd get a bigger check later on...

Any suggestions? Thanks in advance for your help!

[MDM]

When you start getting into discrete choices, a custom tool may be worthwhile.  Check http://moneyover55.about.com/od/socialsecuritybenefits/tp/Best-Social-Security-Calculators.htm for options.

[Shane]

When you start getting into discrete choices, a custom tool may be worthwhile.  Check http://moneyover55.about.com/od/socialsecuritybenefits/tp/Best-Social-Security-Calculators.htm for options.

Thanks MDM. I paid the $40 for what looked like the best SS calculator in the article you linked. It's called maximizemysocialsecurity.com. The software requires that you either manually enter or download from SSA's website all of your yearly earnings for your entire life, so I'll have to wait till I get home from work to sit down with my wife and do that together. It'll be interesting to see what the calculator comes up with...

[MDM]

I paid the $40 for what looked like the best SS calculator in the article you linked. It's called maximizemysocialsecurity.com. The software requires that you either manually enter or download from SSA's website all of your yearly earnings for your entire life, so I'll have to wait till I get home from work to sit down with my wife and do that together. It'll be interesting to see what the calculator comes up with...

Indeed.  We're a few years away from this decision, but I've heard good anecdotal comments about the tool you chose.  Interested to hear what you find....

[Numbers Man]

When you start getting into discrete choices, a custom tool may be worthwhile.  Check http://moneyover55.about.com/od/socialsecuritybenefits/tp/Best-Social-Security-Calculators.htm for options.

Thanks for the link. I went looking for reviews of this software and found the following article that gives this software good marks:

http://www.wsj.com/articles/SB10001424127887323848804578607624194813186

[Shane]

maximizemysocialsecurity.com is the only calculator I've found so far that takes into account the extra payments we'll be able to receive if we choose to take my wife's SS while our daughter is still a minor. Also, it requires that you load all of your earnings data into the calculator, so it seems like it may be able to give us a more accurate picture of all of our options. To be honest, I don't really trust the calculator on SSA.gov's website.

Hopefully over the weekend my wife and I will have a chance to sit down and input all of our data into the calculator. After I get some results, I'll post again here. Thanks for the link MDM.

[Shane]

maximizemysocialsecurity.com seems to work pretty well. I guess it was worth the 40 bucks...

Both my wife and I had to open accounts at the SSA.gov website, and then we were able to cut and paste our entire earnings history into maximizemysocialsecurity.com.

Interestingly, we learned that we are entitled to even more social security benefits than we were aware of if we choose to take my wife's benefits when she turns 62 and our daughter is 10 years old. So that was good news for us.

I've been playing around with all different possible scenarios using the online software. You can create various scenarios yourself, and then based on the numbers you give it, the program also creates what it calls the "maximized" scenario. Depending on what ages I tell the software my wife and I are likely to live till (so far I've tried 90,95 and 100), it changes the "maximized" scenario.

It looks like we're probably going to take my wife's SS benefits when she turns 62, and depending on how well our investments are doing, we may choose to have my wife suspend benefits when she turns 66, and then have her restart benefits again when she turns 70 years old. If we feel like we need the money, then we can always keep taking my wife's SS benefits, and then hopefully by a few years later when I'm old enough to begin collecting a "reduced" benefit, we won't need the money, and then we can delay taking mine until I'm ~70, so that we get a higher overall check each month...