It’s been mentioned on HD many times. Rick Connor mentioned it today. I even asked Gemini what was most important, monthly income or total lifetime benefits. Apparently Pipers calculator uses accumulated lifetime benefit as a decision guide.
My monthly pension is most important. I care less what the accumulated amount may be – unless I can become a significant actuarial loss in good health, but it’s financially irrelevant. The fact my pension and SS are both lifetime benefits is important, but that is not the question
The Gemini answer was lifetime benefits are most important for the following reasons which to me have nothing to do with the question. Doesn’t this answer support the idea that monthly income amount is most important?
Why Total Lifetime Benefits are More Important:
- Longevity Risk: The biggest fear in retirement is running out of money. Social Security provides a guaranteed, inflation-adjusted income stream for the rest of your life. If you live a long life (which is increasingly common), a higher monthly benefit that lasts for more years will result in a significantly larger total amount collected.
- Inflation Protection: Social Security benefits receive Cost-of-Living Adjustments (COLAs). A higher starting monthly benefit means your COLAs will be applied to a larger base, leading to even more significant increases in dollar terms over time, further boosting your total lifetime income.
- Spousal and Survivor Benefits: Your claiming decision can impact the benefits of your spouse and/or survivors. If you are the higher earner, delaying your own benefit can mean a substantially larger survivor benefit for your spouse if you pass away first. This contributes to the household’s total lifetime benefits.
- Irreversibility (Mostly): While there are some limited circumstances where you can change your claiming decision (like withdrawing an application within 12 months), generally, once you start collecting, that decision largely locks in your benefit amount for life. You can’t easily go back and “undo” claiming early to get a higher future monthly payment.
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The more I think about this, the more I think talk about break even and maximum lifetime income is an unnecessary complication. There are three possibilities: a single person, a married couple with one high earner (HE) and one low earner (LE), and a married couple with two HEs. I define LE as someone whose own SS, even at age 70, would be less than 50% of the HE’s SS at FRA – i.e. in the event of a divorce.
I think we agreed that a single person in good health who can afford to defer to 70 should do so, thus getting the maximum monthly payment plus the maximum basis for future COLAs. Otherwise she claims early.
Surely a healthy HE married to an LE should do the same, thus also securing the maximum monthly payment for a survivor. The LE might claim early if the money is wanted for a major expense – converting a house to age-in-place, a round the world cruise, taxes on Roth conversions etc. – or to make waiting for the HE’s claim feasible.
In the case of two HEs, both healthy, I would advocate for both waiting. Otherwise, the early claimant will lose out in the event of a divorce. And please don’t tell me that divorce doesn’t happen to seniors.
As a leading edge baby boomer, born in 1946, my spouse who didn’t have 40 quarters of SS earnings, was able to begin collecting half of my FRA benefit when she turned 66. I filed for benefits (we are the same age) and then suspended my benefit allowing it to continue to grow at 8% per year. Around 2015 or 2016 the rules were changed to prevent this from happening thereafter.
I assume that a LE spouse can still file today at their FRA on, assuming 40 quarters of tax payments, on his/her own record. I don’t know how that effects what they might collect when the HE spouse begins to collect benefits at age 70. Will they be able to switch to the spousal benefit if it is higher?
And, I think that a spouse, without 40 quarters of tax payments, is stuck and cannot collect spousal benefits until the HE spouse begins to collect. The spousal benefit is still limited to 50% of the HE spouse FRA benefit.
My understanding is the lower earning (LE) spouse can file on their earnings record at any time after 62, and still switch to a spousal benefit when the higher earner (HE) files. The LE spousal benefit is limited to 50% of the HE spouse’s FRA benefit. However, if the LE files before their FRA, the reduction they receive is permanent, i.e., the future spousal benefit is reduced by the same percentage.
The file and suspend strategy was a pretty good deal for those who adopted it.
I believe the issue of maximization of the Social Security benefit can be described as marketing. Combine fear of dying tomorrow, the distrust & dislike of government and those easily influenced see only two options; take it as early as possible and wait till you get the bigger benefit. No analysis, but conditioned greed. Rarely does either answer maximize and without knowing when you will die, the analysis to maximize is pointless.
I have often found myself at odds with Mr. Quinn on many topics. On this one, I do not disagree with him. The SS actuaries have set up the system of how much you can collect at what age with a firm grasp of life expectancy statistics. So, from an overall basis, they do not care when you file. And, unlike a casino where counting cards in blackjack can give you an advantage over the house, there is no way for you to “win” (ie, collect more than the average for your age and gender when you file) unless you actually live longer than average. And since no one can know when they will actually die, you must accept a risk no matter when you begin to receive benefits.
If you wait until 70 and die at 75, as far as your personal lifetime total, you would have received more by beginning at age 62. Likewise if you begin at 62 and live to 100 your total will be lower than if you had waited until 70.
So, the lifetime total is like SS breakeven calculations; interesting mathematics, but not actionable.
If you have, like many HD readers, over saved and want to optimize for the chance of living longer than the average, or perhaps do Roth Conversions, you will want to wait until 70. If you are 62, recently laid off and broke, you will file at 62 and take the money now. People between these two extremes must spend time pulling on their hair, looking at their navels, sweating bullets, and perhaps rolling the dice to decide when to collect. I would guess, that none will think about the potential lifetime maximum benefit totals.
The most understandable commentary on SSI I’ve read! thanks!
A view based on reality 👍
Isn’t this another example of a thing you can’t really ask AI and depends most on personal perspectives?
AI can crunch numbers for you but it can’t get over the emotional aspects of what is the “best” strategy for an individual. For some it is important to believe they are getting the best overall benefit over a reasonable life expectancy, for others it’s the now that counts.
Across a whole population decisions on defer or not should wash out so you’ll either be a winner or a loser on your strategy. Almost certainly not worth losing too much sleep over unless you are that fine on your cashflow planning.
I am unable to grasp, although i have tried, how under any circumstances what i may or may not collect in total over a lifetime means anything to anyone. Maximizing income when needed as determined by an individual is all that matters.
What about those who save and invest a portion with the intention of leaving a small legacy?
That would be us.
We figured that the kids can inherit our investments and IRAs. And our Condo.
But they cannot inherit our SS or pensions.
But the SS and pensions mean you don’t need as much (or anything) from your investments.
Presumably the larger their monthly benefit, the more they can invest.
So taking the money sooner, to invest longer is better??
Bingo!
If you don’t look at it how can you possibly know whether you prefer to take X now or X+Y in 3 years? Your approach would simply seem to indicate you always hold out until X+Y is maximised?
That’s fine if you don’t “need” the money and want to think in one dimension. Others want at least to understand the consequences of the “what if I don’t live that long?” and the what if I live longer than average?” questions in order to feel they have made an informed decision.
Your inability to grasp things is not I think a lack of intellectual horsepower but stubbornness. Maybe it makes for a fun online “persona” but it must be absolutely exasperating to anyone who tries to advise you in real life.
The informed decision to make is – – – do I need $100 a month at age 67 or am I better off waiting and taking $132 a month at age 70 or sometime in between. My personal circumstances dictate that decision.
It has absolutely nothing to do with collecting the amount I select for one year or ten years. Why would I possibly care about in my total retired life I collect X vs Y?
I want the payments to live on, not to maximize the actuarial odds. Even Piper says the primary decision is taking the benefit when you need it to live on.
Yet you’ve never needed it to live on – why did you not defer as long as possible in that case?
The total life expectation is a proxy for am I making the best decision between risk of an early death and risk of a long lifespan? Clearly if you absolutely existentially need the money at age 62 or 65 or whatever then there isn’t a decision to me made.
I ask again how did you make the decision between X at 67 and Y at say 70? Do you never consider what breakeven point would be on any of your financial decisions?
With your numbers at age 67 do you fancy the bet that you’re going to live past 79 and a quarter? Because that’s what you’re really saying by deferring.
I started at FRA while I was still WORKING BECAUSE WE DIDN’T NEED SS at that point and could save it all including spousal benefit.
That continued for several years until we “wanted” the payments mostly for travel expenses. We stopped investing and put the net (after deductions and income tax withholding) SS payments into a separate bank account where it is used only as needed for travel. It’s being used now to fund summer on Cape Cod.
Never thought about break even, never considered the concept.
Now 18 years later, the tax-free income generated each month is double the additional 24% I would have on the current inflation adjusted gross SS benefit had I delayed claiming to age 70. That is I added 24% to my current gross benefit which 18 years of COLAs in it.
At least now, because of compounding, the interest increases slight each month The money is in three different bond funds, short, intermediate and long term.
Plus we have a nest egg from the many years of accumulation of several hundred thousand dollars.
If I didn’t maximize the benefit, didn’t breakeven, so be it. I have the income and I have the cash-something SS can’t provide.
I welcome your critique, but remember I am not suggesting anything for anyone else.,
“Now 18 years later, the tax-free income generated each month is double the additional 24% I would have on the current inflation adjusted gross SS benefit had I delayed claiming to age 70. That is I added 24% to my current gross benefit which 18 years of COLAs in it.”
I thought your FRA was 66? Wouldn’t the benefit at age 70 be 32% higher (8% per year). Per the IRS the DRC is 2/3 % per month. 48 months x 2/3 = 32%
And the correct comparison would be if you calculated how much you would have accumulated if you waited until age 70, invested the higher benefit in exactly the same way for the 14 years, and then added that tax-free income to the difference in benefits (the 32%).
Comparing the difference in the 2 benefits to the tax-free income alone, without including the accumulated savings in 14 years, is just wrong.
You’re right it is 32%. My error.
My head is going to explode over this discussion.
All I am sure about is the total accumulated lifetime benefits I may collect from SS is of no interest and I can’t see how it should matter when someone is trying to determine when to start their SS benefit.
I am also sure we have a considerable balance of cash we would not otherwise have, but I guess it could have been even more. And we have available additional income if and when we need it.
I see that as better than a higher current monthly SS benefit.
Hmmm. You somehow missed my 2nd point. What do you mean “we would not otherwise have”. If you delayed to 70, saved the
larger benefit for 14 years exactly as you saved the FRA benefit, you would have accumulated about 96% as much cash as you have now, PLUS a 32% larger primary benefit payment.
🤷🏻♂️What can I say. I’m still trying to figure out how the discussion got off the original question.
It seems to be a special gift of yours.
I try not to worry about what could have been. I guess there is always room for more or better, but what I have done has allowed us to exceed any expectations I had growing up.
But that’s entirely the reason why you are posing the question and just don’t get the answers you are getting? It never mattered that much to you because of your privileged position – you never needed to optimise and therefore it doesn’t matter that in view of your longevity you’d have come out ahead by deferring longer (certainly sole – possibly spousal benefit skews the advantage a bit).
Like you say taking earlier and investing it (at higher risk than a guaranteed SS payment) is a valid strategy. This is another thread where you ask what appears to be a genuine question and then reject all responses which do articulate why it might matter to people.
Optimize monthly income including considering a surviving spouse, the best way you can based on your benefit starting date.
I never argued about that, but you are not optimizing anything if you base it on breakeven or total benefits collected over a lifetime.
I think you’re taking a one dimensional interpretation of the word “optimise” to mean maximise. While others mean it to mean maximise over the total expected duration. Maybe your strategy did result in lifetime optimisation by the time you took into account spousal benefits -most online calculators would be set up to do that IF you actually took advice/research.
Maybe it was just hidden maths to you that’s why you reject what goes on under the hood.
AI doesn’t think, if you ran AI in the late 19th century it would likely have told you about how important phrenology was in predicting intelligence. There’s no reason to assume current AI isn’t making similar types of errors.
You misunderstand the purpose of aggregate lifetime benefit. It’s an inflation adjusted look at total expected purchasing power. It’s not how much someone would expect to receive as it’s calculated on a present value basis.
So it’s not a measure of what you’d collect rather it’s figuring out which stream of income would be most expensive to purchase. But that you don’t actually pay the difference, you pay by waiting.
You’re making an argument that people shouldn’t think about inflation or longevity risk, which doesn’t make any sense to me unless someone thinks they have so much in assets that they have other ways of dealing with that risk.
I certainly thought about longevity risk, it’s why I waited to age 70. I never bought into the concern about break even, nor do I have any interest in how much I will collect in total over my lifetime. I was solely motivated by getting the largest monthly payment. Very simple.
Never said you weren’t, I said your decision points were more straightforward because there aren’t as many variables. The math says you had 96 different choices and that they were arranged in a linear fashion so very easy t navigate.
Spouses have over 9,000 choices and if you graphed it in 3 dimensions it would look like a bumpy tilted plane.
Maximum lifetime benefit is just meant to help you navigate that bumpy plane, for you it was a straight line, no aide needed.
Not having a spouse I have never looked at the issue, but presumably it is not that difficult to figure out what will result in the largest monthly benefit for the survivor. Adding in concerns about break even and lifetime income simply confuse matters unnecessarily.
It would appear we are the only two long time retired experienced people who understand the income we receive for our lifetime is the most important goal.
As far as a spouse goes, I used several strategies to assure survivor income and assets.
It’s those darn spreadsheets trying to predict every element of the future and assuming it will, always result in the predicted best result. 😎🤑😱
It’s not complicated. It’s a matter of minutes to model for someone competent with a spreadsheet or pocket calculator.
Some would say income be damned – it’s making your overall portfolio of assets work best at an acceptable level of risk to meet your requirements to the end of your life is the most important goal. WIth possibly a secondary goal of legacy if you comfortably meet the first goal.
SS is just another asset – sure you can’t cash it for cash but it is something where you can make a conscious decision as to how it should work for you. For some say without a formal pension who have plenty of other assets elsewhere they might tactically want to take early to provide baseline income and allow themselves to take bigger risks with the rest of their portfolio. That’s sacrificing income for investment growth – not unlike what you did in not choosing maximum deferral of SS.
Amen. Why is everyone making this so complicated and difficult?
We can usually determine when we begin to collect and how much, but we can’t know and neither can some social security maximization calculator know for how long.
If we are curious we can look up the SS actuarial table to get a good guess.
I just looked it up my longevity at the age I began SS benefits and at my current age.
I’m pleased to see I’ve picked up 6 more years.
Have I maximized yet? I’m confused. No matter, I don’t care one little bit.
No matter when I start my monthly income it is inflation adjusted is it not?
Do you care about your total expected purchasing power over the next twenty years or that you can pay the bills over the next three years?
Today, you are going to decide when to start your life income stream based on such a projection using several assumptions including your life expectancy?
This is a contradiction of what you claim of your own approach. You write about how your thinking is not merely this year, next year, but includes concerns about legacy amounts. You used excess SS to purchase more fixed income that provides the same kind of protection as delaying.
You’re doing something similar, but with a different perspective on how to do it, it doesn’t negate the other method.
Also, you never address how the max monthly payment changes over time depending on spousal and survival benefits, which max is most important and is that true universally?
I don’t think so. Nobody trying to maximize their SS lifetime income is going to accumulate a cash balance from doing so.
In fact, they are gambling they will even make it to their goal. Perhaps by using assets as income to delay SS they may lose or sadly not live long enough to make a difference.
I saved the SS for a fixed period. Thereafter, time and compounding took over. Plus the income I generate is 100% tax free even though it earns only about 4%. No matter if I or Connie passes first, there will be at least $400,000 for our children. And if Connie needs the income at least $1600 a month will be there.
Assuring I get more from SS in one or another strategy over my lifetime doesn’t interest me at all.
I think you’re unaware that Open SS won’t always say delay benefits, that’s just not how the math would work, it’s dependent on the differences between primary insurance amounts and age differences. I know because it recommends one of us to take benefits at like 62.
And I’m not sure that would be our optimal strategy. Max Benefit calculators don’t consider taxes, pensions, annuities and how they affect things. It’s a tool, not a commandment.
It recommends one take benefits at 62 because it is looking to the strategy that maximizes the lifetime benefits both combined receive.
Presumably, one will receive less per month for longer and one the opposite. Somewhere down the line twenty years from now in theory you have collected more from SS doing that then say both starting at FRA.
Why is that a desired goal as opposed to an income stream from SS that best meets your needs from age 62 and beyond and considers the need for a survivor income as well?
It seems to me what people need to and want to do is maximize the SS income generated monthly they need to live on in conjunction with other income and assets. The Piper calculator doesn’t even consider any of that.
I just ran an example and it said one file at 65 and the other delay to 70. And then concluded “The present value of this proposed solution would be $330,365.”
So what? Is that PV going to pay the bills for the next five years if our current income is insufficient?
And what does it mean if the person starting at 70 only lives two more years, not the statistic expectancy?
I am I tried it.
How about someone who draws from his investment portfolio (and therefore has no need for Social Security income) until age 70.
If a person has no need for their SS before age 70 then it seems to me their decision is basically to defer to age 70 and collect the higher benefit for the rest of their life or to start the.
SS benefit at an earlier age probably FRA.
If they choose to collect before age 70, they have the option of investing the unneeded SS for whatever period of time it is not needed (or even donate it) or use it for luxuries.
but in neither case, does the decision have anything to do with the lifetime accumulated benefits they may receive with either choice.
Both payments are only made as monthly income for life, including any survivor benefits.
I started at FRA because I didn’t need the money as I was still working. We invested both my and Connie’s benefit for several years. Now, 18 years later we have several hundred thousands dollars in that investment generating about $1600 a month in tax free income- which we still reinvest for the time being.
I think it was a good decision for us, but that doesn’t mean it’s the only decision and I don’t care what impact it may have had on the total lifetime benefits we receive.
But I do care there is still the potential to increase our income now we are in our 80s by turning off reinvesting and there is a hefty lump sum for a future emergency like LTC or to leave to our children.
This discussion was never about when to start collecting SS, only that the decision when to begin benefits has nothing to do with how much a person potentially collects in total from SS during their lifetime.
So Dick, should I wait until I’m 70 and my wife is 73 to start our benefits? Certainly that should result in the highest monthly aggregate payout but we will have forfeited many years of her spousal benefit. She cannot collect anything until I start mine.
Youzza! Highest monthly or highest aggregate?
I have no idea, Ken but for sure what doesn’t matter is the highest aggregate of all benefits collected over your lifetime.
You could start at 70 and make it to 95 or 75. What difference in terms of SS benefits collected does it matter? But what you get each month at 70 versus 67 may well matter, right?
Monthly aggregate = my SS monthly + wife’s SS monthly, if that was not clear. Point being, the sum total of years of extra spousal benefits would be significant bonus “compensation” for me taking my benefits before age 70.
As I’ve posted before, I’m with Dick on this one. I waited until 70 to get the biggest available monthly payment, plus the biggest available basis for future COLAs. I never bothered to look at lifetime maximum or the infamous “break even”. Of course, I’m in pretty good health and I could afford to wait. Not everyone has that luxury, but then lifetime maximum and break even are still irrelevant.
To be fair, the notion of lifetime max benefit is driven by the spousal analysis not individual. That’s when it becomes truly multivariable and you need a graph of results more than a simple number.
How so? It’s like a survivor annuity based on the workers pension. Except the spousal benefit doesn’t go above 50% of the FRA workers benefit.
So, once you maxed the monthly benefit for a spouse, what possible benefit is knowing the potential amount to be collected by either party based on actuarial probabilities?
The issue should still be largest monthly payment, but for two people.
I assume you would agree that mathematically there’s no difference between thinking about the maximum monthly payment and what it would cost to purchase those payments. (it’s just a different way to express the same idea). For one person it’s fairly straightforward.
When you shift from one person to 2, there are so many different combinations (because survivor and spousal benefits complicate it) of max monthly payment.
But those payments over 2 lifetimes, can still be calculated.
That’s what agg lifetime benefit attempts to measure, which pairing of choices, to an avg life expectancy, provides maximum value. Which is just a different version of maximum monthly payment.
Isn’t it the case that the “cost to purchase” monthly payments is affected by interest rates? Therefore the analysis might be different next year compared to this year, while I know the increase in monthly payments I can expect from waiting will be unchanged.
If we were talking about annuities you’d be 100% correct, but SS locks in the formulas and interest rates.
After taxes it’s really hard to beat the extra 8% plus COLA that SS offers. That’s why it’s almost always better to delay the higher earner.
But it gets dicey with what to do with the 2nd earner, the spousal benefit. It caps at full retirement age so no sense waiting till 70, but early benefits sometimes are better than waiting till full retirement age, it depends on what the spousal impact will be.
But even then, you’d really want to consider when you’ll need the income. If you’re happily living on earnings, delaying even if it’s not total max benefit, can provide better cash flow when you need it.
Of course, knowing that you maximize early, could let some couples retire earlier buying time instead of cash flow.
Yes it should
Since the length of a lifetime is unknown and one spends the money month-to-month, isn’t the answer here pretty obvious?
I think so.
I’d say people look at the expected maximum benefit numbers to create an apples to apples comparison of different strategies.
Monthly income is an entirely different notion, that includes other things and other decision points. I wouldn’t contrast the 2 metrics as they tell you different things.
It reads like someone insisting we only need to worry about the speedometer on a car and that the gas gauge isn’t all that important. Different gauges tell you different things.
In this case the gas gauge is never going to show empty, so drive as fast as you like until the odometer no longer works.
Or use all your instruments to be the best decision maker?
I must be really thick because no matter what I can’t see how a number i can’t control in any way, can’t take as anything other than a life annuity has anything to do with deciding when to begin my benefits.
It’s not a straightforward bit of math but the agg lifetime benefit isn’t what you think it is.
It’s a calculation of the cost of buying a certain set of benefits so that you can compare different combos on an apples to apples basis.
It adjusts for inflation and the value of money over time as opposed to that’s my number right now (no thinking about longevity or inflation)
You’re doing some similar thinking in taking earlier and setting aside money for the future. If you can see that as a good thing why wouldn’t you see evaluating the value of future higher payments as a good thing?
We all have different opinions and Dick is back at stirring the HD pot again! The smart play here is it depends on your why and you better have good reason to support the decision. One that can be defended in a debate. This question cannot be answered correctly in a vacuum.
It’s just a simple question that should have a simple answer and is not dependent on opinion.
What is the logic behind concern over the maximum aggregate lifetime benefits as opposed to the monthly income benefit a person decides is best for them?
Does anyone worry about the aggregate amount they will collect from a pension as opposed to the monthly benefit? Never happened in my 50 years managing pension plans.
Somebody just tell me what I am missing about this?
Has anyone made the decision when to begin their SS benefit based not on the monthly income, but rather the aggregate they may collect the rest of their life? Anyone?
“It’s just a simple question that should have a simple answer and is not dependent on opinion.”
It seems pretty obvious from this discussion that it is indeed dependent on an opinion. And on individual circumstances and priorities.
Lots of people make the mistake of SS claiming in a vacuum without a financial plan or strategy and even without regard to their spouse.
Has anyone made the decision when to begin their SS benefit based not on the monthly income, but rather the aggregate they may collect the rest of their life? Anyone?
I know many who have employed a misguided and faulty beak even analysis as an excuse (in my opinion) to claim early.
I have a question and this seems like a good thread to ask. During the Open Championship at Royal Portrush last week, I got chatting with a couple of U.S. guys over a Guinness. When they discovered I was retired, the conversation shifted to that topic, and they mentioned that the U.S. allows people to claim Social Security early because it saves the government money. Is that true, or was the Guinness talking?
It’s the same to projected life expectancy (obviously life span can greatly change the equation). To actuaries calculating the flow over millions of people, they can be pretty sure that the avg life expectancy will be reasonably accurate.
Dan is right, but it’s not government money in any case. Talk to almost any American and they have little idea how SS works, but they are experts in how it doesn’t work.
Mark I believe the actuaries have figured out that it doesn’t matter when a person claims (from age 62 to 70), the cost to the system is the same.
As I suspected.
Interesting question and a nice set of responses which I enjoyed reading!
I look at it from 2 perspectives: the first is aligned with your comment about spouse and survivor benefits. That is important in our situation as my benefit at age 70 will be approximately $2200 higher than my wife’s benefit (she will take at FRA). I want to make sure she will have no financial concerns if I go before her.
The second perspective I will call “get the revenue when you need it most”. Our pensions more than cover our current expenses and allow us to save some each month. Will our expenses significantly increase in the future? I don’t believe they will, but just in case, having the higher monthly benefits at that time will come in handy. If our SS benefits are not needed to meet our expenses, we’ll save more and leave more to our children and grandchildren.
What about taking SS at FRA when you don’t need it, invest it and reinvest earnings and then you will have some to leave that is not dependent on living beyond 70 and if you do need more income later in life, it’s still in your investments to use as you like.
We did discuss that approach, then got to looking at MAGI for Medicare and decided to play the waiting game on the additional income. My wife’s SS income will put us very close to the MAGI figure that we want to avoid.
Or again if they don’t really need the SS benefits how about having the wife claim as soon as she’s eligible and invest the funds 100% in equities to allow to grow until inheritance, while he waits until 70 for that extra security of his maximum monthly (that’s for you Dick) benefit.
For me it was about maximum monthly income at age 70, and the survivor benefit for Chris. Right or wrong, longevity and lifetime totals were not important to me.
Longevity is a factor. Delay taking SS benefits until age 70 and then leave the planet at age 75. That will reduce the lifetime benefit. There are ample calculators to determine the benefits of a surviving spouse.
The actuarial tables calculate the lifetime benefit the longer one lives the greater the benefit. However, the period life tables calculate the life expectancy at age 70 as 14.09 years. Live beyond age 84 and one goes into overtime.
So, why do you care about the lifetime benefit you may receive? That is the question.
Delaying to age 70 gets you a higher monthly income and likely a higher spousal benefit. Maximum income when you need it most is the goal is it not? A guaranteed income stream for five years or 15 what’s the different as long as it is for life?
How long you collect doesn’t seem important at all as far as SS goes and you can’t control it in any case.
“Why do you care about the lifetime benefit……Delaying to age 70 gets you a higher monthly income and likely a higher spousal benefit.” Yes, and if that spouse lives another 20 years (age 90) that higher benefit will make a cumulative difference. Your argument seems to be “take SS as early as possible and leave money on the table.” This isn’t a one size fits all proposition. While we cannot control how long we will live, we do have some control over how much we will collect in a lifetime. If that were not the case everyone would file at age 62.
I dug into the records. G is healthy and all of the women in her family have lived to age 90 and beyond. It is likely she will, too. What would be her benefit should she live to age 90?
If she began collecting SS at earliest retirement age her lifetime benefit would have been approximately $403,000.
At FRA it would have been $356,928.
At age 70 that benefit would have been $370,800.
If a portion is saved rather than spent, there is a boost in returns. G continues to save a portion of her retirement benefits. The prevailing wisdom is delay SS benefits to age 70, but there are nuances. I didn’t delay to age 70 because I decided to invest a significant portion of my benefit. Of course, there were taxes to pay. My net worth has increased substantially since FRA, nearly doubling. I excluded any real estate and depreciated the RVs, which would skew the data. “All real estate is local” so I prefer to ignore it (think of the Palisades fire or Hawaii). To summarize, it is the net, the area under the curve that matters. This applies to investing also.
When we talk about risk, that too has nuances. Save and invest a portion of one’s SS benefit does entail some risk; there may be no gain, or a loss. However, over a period of 10 years if invested in the S&P it can have a force multiplier effect and that was my experience. I should note that I have had no pension to draw upon. Everyone’s circumstances are different.
I think they are both important as are many other factors in the social security claiming decision and I find it a non-value added activity to spend time on the question of which matters most as the answer is likely to vary by household. As far as SS claiming in general, too many folks seem to make the decision in isolation from the rest of their financial situation and even in isolation from their spouse. And Mike Piper is great and has made wonderful contributions to retirement and personal finance education and advice.
If you ask an AI tool a question, and you don’t like the answer, it’s likely a poorly posed question. Trying to determine the “most important” feature of a complex decision, with many variables, is a fool’s errand, in my opinion.
Apparently Pipers calculator uses accumulated lifetime benefit as a decision guide.
Exactly. It’s a piece of data, not the only piece, that can help someone decide. If someone, say the SF example in my earlier post, was to ask you how to decide when to claim her SS, what would you say? As far as I know the financial industry considers present value a valid method of comparing the desirability of options. Do you have a better metric?
When it comes to a life annuity that cannot be converted to a lump sum, like SS and most pensions, I only see the monthly income generated as relevant. What difference is there to me or my survivors whether I collect for ten years or 25?
I never heard someone who wanted to retire ask about the PV of their pension . But when we offered a LS to vested terminated individuals it was important.
The age when to start collecting is a key factor because it obviously increases income so it’s a matter of less for statistically longer or more for a shorter period either choice being equal in total, at least actuarially.
Aren’t I trying to maximize my income during the years when I believe I will need it most?
How does making a decision based on the present value amount that is never available to me, benefit me?
I don’t even know how a SS recommendation can be made without considering the impact on other investments related to living expenses and income before starting SS.
Just to pick up on the PV point – that’s very relevant to retirees who receive a pension but will also need to live off the rest of their retirement portfolio. The PV can be regarded as a bond holding as it is secure meaning a balanced approach could indicate more equity investment in the rest of the portfolio. Then also factor in SS. Hey presto a person might be able to be quite aggressive with equity.
Now I am more confused. I agree a pension or annuity and SS income can and probably should factor in the amount of risk in one’s portfolio.
In theory I guess if all annuities are sufficient to live on the entire pool of investments could be lost with no income or immediate lifestyle consequences although it would still hurt. But how the PV of these annuities, which are only forever annuity payments, has anything to do with the risk taking decision mystifies me.
How do you compare equity (which has an absolute value at any point in time) with income streams if you don’t do a PV on the income? Or the other way possibly convert the capital value of equity into an imputed income by trying to apply an estimated SWR?
How can you take any risk decision without bothering to do any basic calculations? And no, “Well I never did and look how well I’ve done” is not really an appropriate answer for the class.
I surrender. You have me, you lost me.
I will just wallow in my ignorance. It’s too late for me anyway I already made my share of bad decisions.
Somehow I think everyone will take SS between 62 and 70 and not think anymore about it.
Yet you seem still to be thinking about it and trying to justify what you did without clearly explaining your logic or the calculations you made in doing so. And that’s many years after you made your decision. Why did you feel the need to even ask the question in the first place?
I’m not trying to justify anything nor convince anyone to do what I did. I believe it worked for me. Keep in mind the original question.
“Why is the total lifetime accumulated Social Security benefit more important than the monthly amount?”
Thats’s it. I think it’s irrelevant, others seem to think it’s key to determining when to begin social security.
After all this, I still don’t know the answer to the question. It’s like asking me which is more important my monthly pension income or what income I may collect in total from the day I started the pension.