Author Topic: Social Security  (Read 7532 times)

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Social Security
« on: January 22, 2014, 04:43:34 AM »
We have a couple years before my dh will start drawing social security at age 66. I don't totally understand the file and suspend concept.  I know I can draw around 50% of his social security and wait to take mine.  Ay what age am I eligible to draw off of his? Will that limit my income?

I'm vacillating between taking mine at 661/2 or waiting to age 70. There's a difference of $800 a month. We won't need that to live on, but it may decrease the amt we need to pull down each year. It's too far off for me to project. I'll know more when he retires in a few years as to where we stand.

Also...renting versus owning. My brother took my napkin math and put it into a spreadsheet. Selling our home, adding in assumptions of rent increasing and investments increasing at 5%, selling would pay for 20-30 years of rental cost (depending on the price we get). Even without a mortgage, home ownership is so expensive--taxes, insurance, HOA fees, pool and yard supplies even though we do our own work, and that's not to mention roof replacement and other things coming up. Yes, I know we can sell and downsize but we're waiting until my dh retires as we want to move closer to one of our kids. We're also hoping the housing market will recover a little more. Thankfully we bought our home at rock bottom and paid cash for it. It was never worth less than what we paid although less than the improvements we made.

Looking forward to reading replies, and please try not to bash us too much. Haha. I could live the mustachian life, would take it as a challenge, but not my dh. He's come a long ways though from the days he would fill up a cart at Walmart!

Khan

  • Pencil Stache
  • ****
  • Posts: 616
Re: Social Security
« Reply #1 on: January 22, 2014, 05:02:23 AM »
Hey, retiring and never reaching money-death is great too. Retiring early is great if you can pull it off, if it matches with your life and all, but money death.

If there's anything to avoid, it's that.

I'll let others go into the details, but if you don't have to dig into SS at -65-, and if you aren't expecting an earlier then average death(family history, medical issues, bouts with cancer), then it is in your interest from my understanding to postpone benefits till 70. Every year you wait increases your monthly income by 8%. And going forward from there, that's a huge difference in your monthly income. I'm pretty sure it balances out pretty close actuarially, but the change in your monthly income going forward from that point(and as guarenteed as things come in this day and age) would probably leave you feeling on cloud 9 post-70 from a monetary standpoint.
http://online.wsj.com/news/articles/SB10001424127887323407104579039102768408202

HamhockHammock

  • 5 O'Clock Shadow
  • *
  • Posts: 25
Re: Social Security
« Reply #2 on: January 22, 2014, 05:52:46 AM »
You are about 57, right? How old is he now?

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #3 on: January 22, 2014, 07:26:35 AM »
Khanjar, I never want to reach money death,  shudder. Mixed feelings on early retirement. It would have been more doable if I didn't have a work hiatus, but that's the way it goes.  I'm a homebody so working forces me out of the house which is probably a good thing. My dh has some health issues, so that's why we're going to pull his SS when he reaches 65 (full retirement age for him). Thanks for the link even though I was only able to read the synopsis due to not having a subscription.

HamhockHammock, I'll be 57 this year and my dh will be 63.


Miamoo

  • Stubble
  • **
  • Posts: 234
  • Location: Somewhere near Chicago
Re: Social Security
« Reply #4 on: January 22, 2014, 12:36:22 PM »
workinghard . . . thinking/wondering somewhat the same things and looking forward to the replies!

Our plan - which should work out with the SS from what I understand  (I'm 55, dh 57)

I will file at 62 and just save it . . . somewhere . . . haven't decided yet.  (Health reasons, not looking at a long life so I'll grab whatever I can while I can if I can)

Whenever exactly dh files, be it 62 or 67, I will suspend my benefits then re-file for the spousal 1/2 at a later date.

More to this story but looking forward to comments.

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #5 on: January 22, 2014, 01:31:06 PM »
Miami, what I'm confused about.....

At what age can I get spousal benefits?
Will it limit my income?
Will it affect my own benefits at age 661/2 or 70?

Guess I could call SS. Course I know things can change drastically over the next few years. Just trying to figure things out ahead of time.

B&T@AV

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Social Security
« Reply #6 on: January 22, 2014, 01:40:50 PM »
I joined so I could respond to this post.  Someone please prove to me that I am an idiot.

Based on my personal estimate I received from SSA, I think waiting until 70 is wise advice to those that live paycheck to paycheck.  I agree with the "experts" that if you just look at benefits received and spend every dime as soon as you get it, and you look at tables from age 62 to 90, then waiting until 70 is ideal if you can afford it.

Based on my personal estimate I received from SSA, I think it is poor advice to wait until 70 for those that have self-restraint and seem to align their lifestyle with Mr. Money Mustache on several points.  I believe it is wiser to start collecting at 62.

My assumptions are: people on this site will not need the money to live on (as original poster Workinghard noted).  I also assume that in the time period between 62 and 70, the people like Mr. Money Mustache will not be working and will be living off other funds until age 70, but you will spend every dime of SS received after age 70 no matter at which age you choose to start collecting.  You cannot predict when you will die.  I did a projection from age 62 to 90.  Maybe someone can share, but I doubt most Americans are predicted to make it to 90.  So all things being equal, you are just looking to find out what plan gives you the most money in your pocket between 62 and 90.

In my way of figuring, collecting at age 67 may be the best financially.

In my way of figuring, collecting at age 62 may be the wisest as you cannot predict your death.  Take the money and run!

This is my plan.  Tell me why this will never work.

When I looked it up in 2012, SSA said I will get $1,035.00 at 62, $1,602.00 at 67, and $2,032.00 at 70.

Lets start with age 70.  I plan to spend every penny collected from age 70 on no matter what age I start collecting.  I plug it into a compound interest calculator and determine with COLA’s, my total benefits collected from age 70 to 90 is $686,606.40.

I then plug the same data into a compound interest calculator and start collecting at age 62.  With COLA’s, I find my total benefits collected from 62 to 90 is $546,978.84.  All the experts say I would be giving up $139,627.56 if I live to 90 and start collecting benefits at 62 rather than waiting to 70.  What an idiot the paycheck to paycheck people are thinking.

But if I do not need the money to live on (and I am not alone if Workinghard is any proof), and I believe I can manage my money better than have someone else manage my money….

Why not collect at 62 and save every penny in a savings account.  I plug the numbers into a compound interest calculator and find that if I start at 62, by the time I am 70 I will have $139,930.45 in my account.  I restrain myself and I do not spend the money, rather I treat the $139,930.45 as principle and only add the interest earned on the principle to my SS benefit.  So now my yearly benefit is what I get from SS and the interest off benefits received up to this point.  I take advantage of the magic of compounding interest.  That simple fact that everyone knows exists, yet the young ignore and the old regret and those that do take advantage of are classified as “odd” or “lucky”.

I now take every dime of benefits from age 70 to 90 and spend it all.  If I start at 62, then that amount from 70 to 90 is a lousy $437,199.96.  Don’t forget to add all of that beautiful interest.  That adds up to $613,512.33 from 70 to 90.  So the total in my pocket is $1,050,712.29.  Oops, don’t forget about the principle that was generating the interest - $139,930.45, for a grand total of $1,190,642.74.

Again, prove me wrong, but I see myself as being $504,036.34 ahead by taking at 62 rather than waiting until age 70.  67 is the ideal, but without knowing your year of death it is risky.

http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
In 2014 I am 62.  In 2042 I am 90.  Base amount is 0.  Interest rate of 6%.  Calculation period of 29, then 24, then 21.  I estimated a SS COLA (inflation) of 2.83%.  Payments are made monthly (SSA said I will get $1,035.00 at 62, $1,602.00 at 67, and $2,032.00 at 70) and the compound interval is monthly.

bogart

  • Handlebar Stache
  • *****
  • Posts: 1062
Re: Social Security
« Reply #7 on: January 22, 2014, 01:56:58 PM »
Miami, what I'm confused about.....

At what age can I get spousal benefits?
Will it limit my income?
Will it affect my own benefits at age 661/2 or 70?

Guess I could call SS. Course I know things can change drastically over the next few years. Just trying to figure things out ahead of time.

You can find pretty good information about this here:
http://www.ssa.gov/retire2/applying6.htm#a0=1 .

Unless you are widowed or have dependent children, you cannot collect on your record or your spouse's record until you are 62.

If you collect on your spouse's record at 62, that will affect the benefits you qualify for, for the rest of your life (it will diminish the total amount you are eligible for, regardless of whether on your record or his).  If you wait until full retirement age, it won't.  Given the age difference between you and your DH, I don't think the file-and-suspend strategy offers you much, if any, benefit.

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #8 on: January 22, 2014, 04:45:00 PM »
Bogart, thanks for the link and explanation. My dh's SS will be around $2200 at 65. Ironically it won't be that much different from his current net pay after taxes, insurance, 401k, etc. I'm not sure how long I'll work --- probably to medicare age or 66 1/2.  My SS will be around $1700/$2400 month depending on age. I'm thinking I might be able to get 50% of his SS when I'm 66 1/2 and then get my max at age 70?

Brian.tina, you really dived in with your first post! IF both of us waited until age 70 to start pulling SS, we would definitely have to draw from our savings.  I want to avoid that as long as possible and let our current investments continue to grow, thus the reason my dh will draw his at 66 when he retires and I'll keep on working. Obviously at that time our savings rate will decrease. As far as your math, I'll leave that for someone else to prove or disapprove!

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3518
Re: Social Security
« Reply #9 on: January 22, 2014, 07:38:25 PM »
Brian.tina, you really dived in with your first post! IF both of us waited until age 70 to start pulling SS, we would definitely have to draw from our savings.
Keep in mind that your two choices ARE NOT  1) Start SS and retire now or  2) Postpone SS and keep working.  You might well be able to reduce your work hours (or work seasonally or some combination of the two) so that you could postpone SS and be semi-retired now. 

Obviously I don't know what working options are available to you, but think creatively -- what choices do you have?


Khan

  • Pencil Stache
  • ****
  • Posts: 616
Re: Social Security
« Reply #10 on: January 23, 2014, 12:26:52 AM »

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #11 on: January 23, 2014, 03:44:10 AM »
You're absolutely right, MrsPete! We're blessed because both of us are nurses and it definitely gives us a lot more flexibility. My dh hates call and once he's eligible for Medicare he may change his status. We'll have to look at our finances then as it will definitely affect our 401k losing ~6k company match and I would need to get insurance coverage.  All I know is we have around 3 years left with joint income to beef up things.

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #12 on: January 23, 2014, 03:46:02 AM »
Thanks, Khanjar for taking the time to post the link!

HamhockHammock

  • 5 O'Clock Shadow
  • *
  • Posts: 25
Re: Social Security
« Reply #13 on: January 25, 2014, 10:22:03 AM »
Bogart, thanks for the link and explanation. My dh's SS will be around $2200 at 65. Ironically it won't be that much different from his current net pay after taxes, insurance, 401k, etc. I'm not sure how long I'll work --- probably to medicare age or 66 1/2.  My SS will be around $1700/$2400 month depending on age. I'm thinking I might be able to get 50% of his SS when I'm 66 1/2 and then get my max at age 70?


Hey couple things--you may be aware already but I couldn't tell from your posts, so please excuse me if you do If your husband is turning 63, then his full retirement age is 66, not 65. You used 66 originally, then you mentioned 65 in a few other posts. If he were to retire at 65, it would be "early," his benefit would be reduced somewhat, and it would possibly be further reduced for work. But if he delays collecting his benefits past his full retirement age, then he would gain "delayed retirement credits, increasing his benefit by 2/3 of 1% per month, or 8% per year. This accrual ends the month before age 70. So, if he were to delay collecting benefits until age 70, he would receive about a 32% bump.

As bogart pointed out, if you were to file at age 62, you would not be able to choose which benefit you file for: you would file for both your retirement and your spouse' benefits, both would be reduced by early filing, both would be reduced by work, and you would get the higher of the two benefits. This is a permanent move.

At your full retirement age, 66.5, you are able to choose which benefit to file for. So, to your point above, you could file for spouse's benefits at age 66.5, get them, and accrue delayed retirement credits on your own record until you file for your retirement on your own work history. Some risks to consider with this approach though --one is that the rules may change and you may not have the option to do this in a few years. Another is health and longevity: delaying your retirement may not make sense if you or your husband were to die relatively early (sorry to be morbid). 

Anyway. Hope this helps. I'm not a lawyer. This isn't meant to be professional advice. Your circumstances may vary. Seek professional advice. Etc.

« Last Edit: January 25, 2014, 10:34:58 AM by HamhockHammock »

Workinghard

  • Pencil Stache
  • ****
  • Posts: 636
Re: Social Security
« Reply #14 on: January 25, 2014, 06:41:54 PM »
Good catch, HamhockHammock. I'm am aware that retirement/SS age 66 but typed 65 which is his Medicare age. Ugh! Anyway, because of his health he'll start drawing once he turns 66. He's the easy one! After reading the input, I'm going to wait until I reach 66.5 to get full retirement benefits and see what options are available at that time. Like you said things cn change.  As much as I would like to plan everything out, some things I can't.  Thanks for your input and "unprofessional" advice!