# Calculation of Social Security

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.

Exactly. Different strokes for different folks. And that’s what I’ve been saying.

When discussing life expectancy in the context of Social Security, it’s critical to remember the S in OASDI- Survivor.
While the chance of any particular 70 year old reaching 90 or 95 may be relatively low, the odds that a married couple that age will have a surviving widow/widower who reaches 90 are quite high- about 45%.
I got that number from this Michael Kitces article, which links to a Joint Life Mortality Calculator excel file. https://www.kitces.com/blog/rigorous-analysis-of-pension-opt…

The spreadsheet is based on SSA’s “Period Life Table 2004” which I assume is fairly conservative for 2022, since life expectancy tends to get longer over the years (post-USSR Russia excepted!).

An event that has almost a 1 in 2 chance of happening has to be planned for. I don’t recommend playing Russian roulette with 3 bullets loaded!

Waiting until 70 to take SSI can be seen as an insurance policy for the couple, increasing the odds that the survivor never runs out of money since the increased benefit becomes the couple’s survivor benefit.
Obviously, with health, diet & lifestyle issues YMMV to the point where claiming at 62 makes total sense.
My take: if you & your spouse are in average to above average health, planning for at least one you to reach 95 seems prudent.

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Waiting until 70 to take SSI can be seen as an insurance policy for the couple, increasing the odds that the survivor never runs out of money since the increased benefit becomes the couple’s survivor benefit.
Obviously, with health, diet & lifestyle issues YMMV to the point where claiming at 62 makes total sense.
My take: if you & your spouse are in average to above average health, planning for at least one you to reach 95 seems prudent.

And this is why, as I understand it, it makes a great deal of sense for many couples for the lower earning spouse to take benefits at 62 and the higher earning one to take benefits at 70. But it makes sense to run the numbers to see what works out the best for the couple’s unique circumstances.

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.

Delayed gratification is a powerful tool. `Studies show that delayed gratification is one of the most effective personal traits of successful people. ... Over time, delaying gratification will improve your self-control and ultimately help you achieve your long-term goals faster.`

Last time we discussed Roth Conversions and mentioned the tax rate changes when one goes from MFJ to Single filing, you acknowledged you had not taken that into consideration and finally realized you needed to do so. I don’t see that analysis here. Did you ever get around to considering that?

IP

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Last time we discussed Roth Conversions and mentioned the tax rate changes when one goes from MFJ to Single filing, you acknowledged you had not taken that into consideration and finally realized you needed to do so. I don’t see that analysis here. Did you ever get around to considering that?

Considering what? Roth conversions or delayed gratification?

At some point you need to realize that you’ve run out near the end of the rope.

My mom – a depression baby – couldn’t bear to spend her money right up to the end. We told her, “Mom, you and Dad saved all your life for a rainy day. Now Dad’s dead and you are old, THIS is the rainy day you saved for. For goodness sake, spend some of it and enjoy it while you can.”

As for us, we delayed our gratification from our 20’s to our 60’s. Now it is time to enjoy the gratification that we delayed.

`Over time, delaying gratification will improve your self-control and ultimately help you achieve your long-term goals faster.`

And when you’ve achieved your long-term goal, then what? Keep delaying? Why?

intercst keeps making a motte-and-bailey argument.
There is a minority of people who have the resources to delay SS. Some of these can just barely afford to. The others have so much money that they can easily afford to.

Those that can easily afford to have so much money that the extra SS benefit they collect is essentially pocket change.

There’s 3 groups of people.

1. Those who cannot afford to defer SS. They need that money.
2. Those who can barely afford to defer. These are doing it on a shoestring.
3. Those who can defer without blinking.

Apparently group 1 is 95% of people.
Hence groups 2 & 3 are 5% of people.
Knowing the rapidity which money grows with compounding, I suspect that the majority of this 5% is in group 3.

The only group that needs to think seriously about deferring is group 2.
Group 1 doesn’t need to think about deferring–because they can’t defer.
Group 3 has no need to think about deferring–because they don’t really need the extra SS benefit, they already have plenty enough.

Jim Cramer has a saying about stock management, “Sell them when you can, not when you have to.”

The wife and I were talking about a related thing today. We are glad that we went on cruises in 2006 to 2019. If we had waited until nowadays, we’d be out of luck.
As long as you can afford it, do it now instead of putting it off for the future. When the future comes about, the opportunity may no longer be available.

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Those 95% of people see something that the 5% don’t (or won’t).

Probably 95% of the 95% see an immediate need for income to support their current lifestyle. That’s way different than making a choice to claim early, even if you don’t need the income.

And a lot of these 5% staunchly refuse to consider looking at it from the other people’s point of view.

And I could say the same about you, since you always seem to advocate for claiming early, no matter what the circumstances and motivations for any individual are.

AJ

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Rayvt analyzes

intercst keeps making a motte-and-bailey argument.
There is a minority of people who have the resources to delay SS. Some of these can just barely afford to. The others have so much money that they can easily afford to.

Those that can easily afford to have so much money that the extra SS benefit they collect is essentially pocket change.

That’s right. It’s those people who “can just barely afford to delay SS” are the ones that would benefit the most from the extra \$100,000 to \$200,000. That’s why the widespread innumeracy is so damaging. An extra \$100,000 for me is probably lost in the round off.

For example, if you have \$500,000 in retirement savings and are in good health, it would make a world of sense to spend down half of that \$500,000 to delay SS for as long as you can.

We see the same idiocy in the extra 300,000 unvaccinated people who have died of COVID since the vaccine was readily available in April/May of last year.

You make your choices and live with the results.

intercst

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Last time we discussed Roth Conversions and mentioned the tax rate changes when one goes from MFJ to Single filing, you acknowledged you had not taken that into consideration and finally realized you needed to do so. I don’t see that analysis here. Did you ever get around to considering that?

Considering what? Roth conversions or delayed gratification?

The impact of taxes when one spouse dies leaving the other to have to file single vs MFJ. You have always said that you pay taxes now or you pay taxes later, that the net result was the same after accounting for the lost investment income from paying taxes earlier than later via conversion. But you admitted that you had not taken into account the potential for one spouse to die before the other. With Roth conversions during MFJ taxes, you insure that money will not be taxed at single rates. Did you ever get around to considering that on the taxes for TIRA not converted to Roth?

As to the rest of your post, yes, so many different people, which is why it is important for the individual to look at their situation and run their numbers rather than use blanket platitudes to apply generically to everyone. IRAs, Traditional or Roth, are about the INDIVIDUAL as well as those who may inherit those funds, like a spouse. Therefore it is important to look at the pertinent issues for the individual and their beneficiaries. Not their mom, not their neighbor, not the cast of thousands you want to categorize into percentages, but those who have a present or future interest in the IRA.

The wife and I were talking about a related thing today. We are glad that we went on cruises in 2006 to 2019. If we had waited until nowadays, we’d be out of luck.

And would postponing SS until 65 or 70 have kept you from being able to take that cruise?

IP

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The percentage of people who claim SSI at 62 has dropped fairly dramatically in the last 12-15 years or so. Conversely, the percentage of retirees claiming at Full Retirement Age (FRA) of 66 has risen.

Quotes taken from: https://www.daily-journal.com/life/family/the-most-and-least…

<<Age 62: This is the earliest you can sign up for Social Security and the most popular age. About 34 percent of women and 31 percent of men signed up for Social Security at 62.>>

Note: That’s down from over 50% of people in 2005. https://money.usnews.com/money/retirement/social-security/ar…

7% claim at age 63, 7% claim at age 64, 12% claim at age 65.

There’s a big bump at 66:
<<Age 66: This is FRA for people born between 1943-54. If you fit into this age group, you’re eligible to claim unreduced Social Security benefits. About 29 percent of men and 22 percent of women sign up for benefits at 66. But if your FRA is 67, you will get a 6.7 percent pay cut if you sign up here.>>

<<Age 67: People born in 1960 or later will be able to claim un-reduced Social Security payments starting at age 67. Baby boomers born before 1955 will get an 8 percent increase if they wait to claim their benefits at 67. Less than 4 percent of men and 3 percent of women start their benefits at this age.>>

The article hilariously fails to realize that 67 is an unpopular claiming age today because ZERO PERCENT of people with a FRA of 67 have turned 67! Morons. People with a FRA of 67 are a youthful & vigorous 61-62 today (like me!). I predict that 67 is gonna get real popular as a claiming age in 5 years.

2% claim at age 68, 2% claim at age 69.

<<Age 70 and older: Waiting until age 70 offers the biggest possible payout. About 9 percent of women and 6 percent of men held out until this age.>>

Bottom line, even though full deferral to 70 is still quite rare, even deferring until FRA represents a nice raise over the age 62 PIA, which suffers a 25% (66 FRA) or 30% (67 FRA) haircut.

Apparently, the word is getting out.

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Is there a statistic of the number of people who are eligible but never claim - die before 62 ?

Looks like the data starts with claims. Is there any that starts with people who have 40 quarters paid in ?

According to the actuarial tables at social secuity.gov,about 13.5% of people born in 1957 did not live until 62. About 16.5% of men and 10% of women.

JK

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According to this link- https://www.ssa.gov/policy/docs/ssb/v71n2/v71n2p17.html#mt8, 5.7% of SSI "never-beneficiaries’ aged 62-84 died prior to receiving SSI, although they had accumulated the minimum 40 quarters of work to become eligible.

<<Categories of Never-Beneficiaries

To qualify for Social Security retirement benefits, a worker must accumulate 40 quarters of coverage (QCs). A QC is credited for a given dollar amount of earnings in covered occupations, rather than for a number of months worked. Nevertheless, accumulating 40 QCs requires at least 10 years because no more than 4 QCs can be credited in any year… Almost all (94.5 percent) of the never-beneficiaries aged 62–84 in 2010, for one reason or another, have not satisfied these requirements and thus do not receive benefits in 2010 (Chart 2). The remaining proportion of aged never-beneficiaries comprises individuals who are projected to be eligible for Social Security benefits, but die before receiving them.>>

Note: this number does not include people who die before 62.

I would assume the mortality rates for those dying before 62 skews heavily towards Blacks, especially Black men. Black male mortality in the 55-64 cohort is about twice as high as the white rate. (https://www.mdch.state.mi.us/osr/deaths/ageadjdxARS.asp)
In the 15-24 & 25-34 cohorts, Black male mortality is about three times higher the white rate, likely because of 9 mm-induced lead poisoning & drug ODs. OTOH, I imagine when you die at 25, lost Social Security income doesn’t make your Top 5 List of Regrets. It sucks for the middle-aged workers, though.

Is there a statistic of the number of people who are eligible but never claim - die before 62 ?

Another two actuarial statistics that may help people decide when to take SS may be to look at the percentage of people, by demographics (race, sex, income), who take SS at 62 and die before 70, as well as those who take SS at 62 and die before the break-even point in cumulative benefit, which is about 79. In both those instances, the beneficiary is a winner, of course, and having waited until 70 not so much. I haven’t seen anything directly about this, but it is likely somewhere in a table:)

https://smartasset.com/retirement/social-security-break-even…

Pete

Another two actuarial statistics that may help people decide when to take SS may be to look at the percentage of people, by demographics (race, sex, income), who take SS at 62 and die before 70, as well as those who take SS at 62 and die before the break-even point in cumulative benefit, which is about 79. In both those instances, the beneficiary is a winner, of course, and having waited until 70 not so much. I haven’t seen anything directly about this, but it is likely somewhere in a table:)

This ignores the “longevity insurance” value of SS. If you die before you breakeven, you might have some regret on your death bed that you didn’t have that extra SS available during your final years. But then you’ll be dead, and no longer regretful. But if you live, you’ll have maybe years and years of “insurance payoff” for deferring to age 70. It’s not just about whether you breakeven or not.

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Am paying tax today on IRA to Roth conversion for 3 reasons:

1. The file single vs. MFJ consequence
2. Projected IRA tax owed when I’m 72 higher than today with SS
3. Tax treatment of inherited Roths

Paul

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To my knowledge the ss breakeven point ignores the time value of money. In other words,there is no assumption that money not spent earns some return when ss is taken early. That is a glaring flaw in determining the breakeven point. I did this calculation once,and if I remember correctly the breakeven with a 6% return was 94 years old.

JK

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I did this calculation once,and if I remember correctly the breakeven with a 6% return was 94 years old.

I doubt 6% is a “risk-free” return. Essentially, you’re delaying SS for 8 years (62 to age 70) in order to buy a 75% larger, inflation-adjusted life annuity. You need to be investing the monthly benefit from age 62 to 70 in something like an FDIC-insured CD that’s going to guarantee that you have the money to “buy” the annuity at the end of 8 years. If I assume I can get 6% or 10% by investing the money in the stock market, it’s not guaranteed. I could have an underwater portfolio when it came time to buy the annuity at age 70. That’s where the understanding of actuarial science comes in. You’re comparing a guaranteed benefit to a variable investment return.

intercst

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The impact of taxes when one spouse dies leaving the other to have to file single vs MFJ. You have always said that you pay taxes now or you pay taxes later, that the net result was the same after accounting for the lost investment income from paying taxes earlier than later via conversion. But you admitted that you had not taken into account the potential for one spouse to die before the other. With Roth conversions during MFJ taxes, you insure that money will not be taxed at single rates. Did you ever get around to considering that on the taxes for TIRA not converted to Roth?

It’s the same thing. Isn’t it? I’m pretty sure it is.

When you take money out of a TIRA, it gets added to your taxable ordinary income (except for things specifically exempted, like QCD).
Same if you withdraw the money and spend it as if you convert it to a Roth. It gets added to your taxable income when it comes out of the TIRA.

If you leave the money in the TIRA then after one spouse dies, the survivor will be taxed at single rates when they withdraw it.

And would postponing SS until 65 or 70 have kept you from being able to take that cruise?

Good question. I don’t really know. We spent around \$250,000 on cruises. The SS we got from 62 to 70 was around \$300,000.

I do know that we got around much better at 62. And do know that cruises were happening in those years. The last couple of years, NO CRUISES. Even now, traveling cnd cruises are very iffy. Lots of destinations are closed and/or restricted to tourists.

But it’s not about me. NOBODY could take cruises inthe last couple of years.

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Is there a statistic of the number of people who are eligible but never claim - die before 62 ?

Looks like the data starts with claims. Is there any that starts with people who have 40 quarters paid in ?

`About 5.7% of workers who are projected to be eligible for Social Security benefits die before receiving them.`