# Calculation of Social Security

First, I would like to thank those who advised me on my previous post requesting information on spousal Social Security.

The author of the book “Money Magic” has a web site, www.maximizemysocialsecurity.com, which for \$40 calculates various scenarios given the actual annual Social Security earnings which can be obtained at MySocialSecurity.gov.

Given the importance of the decision, I decided to do this.

As advised by aj485 and BruceCM, I am not allowed to pause my benefit and also receive a spousal benefit based on DH’s benefit. However, the web site advised that our cumulative individual and personal benefits could be maximized by both of us pausing our benefit now (Feb. 2022) and re-starting it at age 70. For DH, that would be late 2022. For me, that would be early 2024. The cumulative benefit was substantial – \$88,500 over the course of a lifetime projected to be 100 years.

Ah, but wait! The devil is in the details! The calculator did NOT show the year-by-year cumulative effect of following this strategy.

I copied the annual benefits into an Excel spreadsheet. I would miss almost 2 years of benefits, while DH would miss most of one year, a deep hole. The small increase in the benefit after age 70 gradually filled these large holes.

The breakeven point of this strategy is reached when we are 82-83 years old. After that, the benefits gradually accumulate, growing to the substantial cumulative benefit at age 100.

I feel that this calculator was useful in giving numbers for me to analyze. But I feel that the lack of annual cumulative numbers hides the detrimental effect of following the recommended strategy for those who don’t expect to live a very long life.

The annual positive difference by waiting until age 70 produces a relatively small benefit after a long wait, but a significant negative difference if we die before age 80, as I expect we will.

I think this was a useful exercise. Of course, everyone will have a unique situation based on their income and life expectancy.

Wendy

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After that, the benefits gradually accumulate, growing to the substantial cumulative benefit at age 100.

It is to laugh.

How many people live to 100?

How much more useful is the money now vs. the (larger) amount after 82-83?

The point of having money is to buy things and do things for your enjoyment. I submit that you get more enjoyment and use of extra money from 70-83 than 83-XX. Especially since XX is unlikely to be anywhere near 100.

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Some of us look at it differently and like the longevity insurance factor. And if you don’t live to 82-83, the “breakeven point”, then so be it. You’ll be dead anyway and won’t be wallowing in sorrow that your insurance bet lost. But if you do make it, you will have had the extra dollars from age 70 on and will continue to enjoy the higher benefit into old age. I will note that if it just ends up going to the nursing home at or before the breakeven point, then you still effectively lost the longevity insurance bet.

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How many people live to 100?

My Dad is 101, and just bought a new car in October. He’s not showing any signs of slowing down anytime soon, although we all realize that could change at any moment. His mother lived to be 92, and his father lived to be 98. For my planning, I assume that I will make it to 100 so that I can ensure there will be enough money to live on. If I am wrong, my children will inherit more money, so I’m fine with that.

How much more useful is the money now vs. the (larger) amount after 82-83?

The point of having money is to buy things and do things for your enjoyment. I submit that you get more enjoyment and use of extra money from 70-83 than 83-XX. Especially since XX is unlikely to be anywhere near 100.

The implied assumption in your statement is that the additional money from collecting SS earlier will be spent and used to do something now. That’s not true in my case as we already are not spending to the projected retirement budget, and yet we are doing whatever we want. So having more money earlier in my case does nothing to change our current standard of living. Instead, I plan to wait until 70 to collect my SS because I do view it as longevity insurance, and it is my want to make sure that I will continue to have enough money should I live as long as Dad or longer.

There is no one size fits all, and for some folks, collecting SS earlier makes sense, but for others such as me, waiting makes more sense. It all depends on the particular situation.

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<<After that, the benefits gradually accumulate, growing to the substantial cumulative benefit at age 100.>>

It is to laugh.

How many people live to 100?

How much more useful is the money now vs. the (larger) amount after 82-83?

The point of having money is to buy things and do things for your enjoyment. I submit that you get more enjoyment and use of extra money from 70-83 than 83-XX. Especially since XX is unlikely to be anywhere near 100.

You’re still misunderstanding the actuarial science. If I have a larger inflation-adjusted SS check when I’m age 80, I can safely withdraw more from my retirement saving at age 62. The question is which strategy gives you the most money over your expected lifetime.

The SS Administration says the increase in the monthly benefit for delaying from age 62 to 70 is actuarially neutral for the “average” benficiary. But the people with the retirement savings required to delay benefits to age 70 are almost exclusively high income earners who live 4 or 5 years longer than average.

For someone getting the max SS check it’s about \$100,000 extra (\$200,000 if your spouse is collecting benefits off your earnings record.

That’s a lot of money to leave on the table due to being ignorant of the arithmetic. It’s at least equal to “free Obamacare.”

intercst

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Wendy
Good thinking.
If you begin benefits at FRA and invest all proceeds received, net of any tax on them as household income, up to age 70, and compare this with the higher benefit at age 70, the difference will be small, depending on your assumptions on investment returns and tax rates.

I’ve done several of these comparisons in Excel and I’ve never been able to see a significant difference.

BruceM

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In your earlier post you said-
“I was treated for bilateral breast cancer at age 62, in 2015. My mother died of cancer at age 72 so I feel like I have a sell-by stamp on my butt. However, I have a cousin who has survived breast cancer for over 20 years after treatment so it’s hard to say for sure.”

You’re already 6 years post-cancer. Your mother’s fate isn’t linked to yours. My grandfather died at 68 of a heart attack, but my Dad just turned 96 & is doing pretty well.

Just for fun, plug your data into a life expectancy calculator- you might be surprised by the number. https://www.blueprintincome.com/tools/life-expectancy-calcul… Obviously, just a guestimate, but it might help you realize that you aren’t destined to check out at 72.

Have you tried running the numbers on just you taking a one year suspension of SSI? You’d sacrifice a year of SSI income in exchange for an 8% bigger check.
Not earth-shattering, but a middle way between doing nothing & both of you halting SSI for a total of three years.
I’d imagine the breakeven point would move to the left (earlier) in a big way.

You’re still misunderstanding the actuarial science. If I have a larger inflation-adjusted SS check when I’m age 80, I can safely withdraw more from my retirement saving at age 62. The question is which strategy gives you the most money over your expected lifetime.

^ This is the part that gets overlooked all too often in these discussions. A while back I ran some scenarios in cFIREsim and each scenario showed that delaying SS either increased the SWR and/or improved portfolio survival.

At least for the inputs I used, if you want to spend the maximum amount of money in your early years, you should delay SS.

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Just for fun, plug your data into a life expectancy calculator- you might be surprised by the number. https://www.blueprintincome.com/tools/life-expectancy-calcul…… Obviously, just a guestimate, but it might help you realize that you aren’t destined to check out at 72. - SnootFool

That calculator was fun. I was surprised that it did not ask about the longevity of your parents. I have consistently heard that is a factor.

Also, the only specific chronic disease it asked about was diabetes, everything else about your health was captured in the overall health question. So all other things being equal being treated for high blood pressure or cancer would score the same.

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I was surprised that it did not ask about the longevity of your parents. I have consistently heard that is a factor.

That was dispelled back in 2018 by a “big data” analysis of the Ancestry.com database performed by the geniuses at Google.

A Longer Life May Not Be in Your Genes
https://www.livescience.com/64018-longevity-genetic-question…

Long life spans tend to run in families, a phenomenon that’s often attributed to people’s genes. But now, a large new study of data from the genealogy website Ancestry reveals that genetics may play less of a role in life span than previously thought.

The reason? Previous studies failed to take into account a quirk of human relationships: that people tend select romantic partners with similar traits to their own. The findings mean that previous studies may have substantially overestimated the heritability of life span, the researchers said.

Diet, exercise, and lifestyle choices are much more important than your genes.

intercst

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Just for fun, plug your data into a life expectancy calculator- you might be surprised by the number. https://www.blueprintincome.com/tools/life-expectancy-calcul…… Obviously, just a guestimate, but it might help you realize that you aren’t destined to check out at 72.

The most interesting thing with this calculator was that it pushed annuities for both DH and I, given how long they say we are going to live. I played with some of the questions and still got 93 for both of us, even after checking off “diabetic.”

I wouldn’t bet on this calculator.

IP

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You’re still misunderstanding the actuarial science.

I’m not sure he is. Rayvt is simply pointing out that most people, in fact the vast majority, do not live to 100. Is that a misunderstanding of actuarial science? What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

I also agree with you about this: “Diet, exercise, and lifestyle choices are much more important than your genes.” I’ve seen this over and over throughout my decades on earth.

Pete

I was reading recently, and now can’t find the article (of course!), that in some circumstances one may want to take the option of “resetting” SS. Apparently you can do that. For example, you can start taking SS, and then “change your mind”, repay the benefits, and start taking (increased) benefits at a later age.

Repaying the benefits received could be a problem for a lot of people. But I thought it was interesting that this option even existed.

1poorguy

What I get from Ray is that 62 may sometimes be a good age to take SS

What I have gotten from Ray’s posts over the years is that 62 is always a good age to take SS.

PSU

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What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

Then you must be reading different posts from Ray than I have been because it seems to me that he has pretty much insisted that taking SS at 62 is the only way to go. From my reading, he does not consider that folks may have different circumstances for which a different choice is better.

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Previous studies failed to take into account a quirk of human relationships: that people tend select romantic partners with similar traits to their own.

My wife is praying that quirk is incorrect.

AW

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Rayvt is simply pointing out that most people, in fact the vast majority, do not live to 100. Is that a misunderstanding of actuarial science? What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

Right. Very few people live to 100. And not that many life to 90.

Let’s take the 2019 SSA table https://www.ssa.gov/oact/STATS/table4c6.html
Table says average life expectancy at 70 is 14.60 years. 62 is 20.28. 65 is 18.09.

Let’s say that for Financially Independent people (ahem, like us) do better than this. As intercst says: “the people with the retirement savings required to delay benefits to age 70 are almost exclusively high income earners who live 4 or 5 years longer than average.”
So let’s shift the Avg Life Expectancy for 70 years old to the 65 YO figure.
Then avg life expectancy is 70 + 18 = 88.
Orig table LE is 70 + 14.6 = 85.

If we want to be really generous, use the LE for 62 year olds.
70 + 20 = 90.

Back to the table, ask what percentage of XX year olds live to 90.
70 YO’s: 18,913 / 72,924 = 25.9%

If we use the figure for an extra 5 years, the number for 75 YO’s:
18,913 / 63,739 = 29.7%

So for us 70 years olds that are high income earners who live 4 or 5 years longer than average, a little less than one-third of us will see 90.

That’s what I can glean from the actuarial data. Maybe I’m all wet, though.

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What I have gotten from Ray’s posts over the years is that 62 is always a good age to take SS.

Bird in the hand.
Bird in the hand vs. 1.77 birds in the bush. Not even the 2.

SSA: “only 5% of men wait until 70, according to Social Security Administration data.”

Those 95% of people see something that the 5% don’t (or won’t). The 5% assume that they are right and everybody else is wrong and stupid. And a lot of these 5% staunchly refuse to consider looking at it from the other people’s point of view.

(Not actually “62” though. Actually the earliest age after you are retired.
Which, granted, is probably 62 for most financially independent folks. I retired at 58.)

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…it seems to me that he has pretty much insisted that taking SS at 62 is the only way to go…

Well, if that is what he is saying, that 62 is always the best age to take SS, then I disagree with him as well. I do not think there is a “one size fits all” for taking SS benefits.

Pete

The most interesting thing with this calculator was that it pushed annuities for both DH and I, given how long they say we are going to live.

There’s a good “side point” in this discussion: If you’re tempted to buy an annuity, run the numbers of the annuity vs. delaying SS and living off the money you would have spent on that annuity. I know of one person who did that, and found he was money ahead the latter way.

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