Retirement Question

[California]

I wonder if this is what you reference. Clear as mud

Social Security Q&A: With an Older Lower Earning Spouse, How Should We Sequence Our Claims?

Yep. Now you're as confused as me.

The earlier descriptions we relied on were written more clearly but its a complex subject. In our case our lifetime earnings were similar so that particular example isn't a close match.

I wasn't aware of the Big Changes that Capricious referenced, so by the time you retire there may be different variables to consider.

 

[Capricious]

Concerning the fiscal mess this country (USA) is in, I would expect there to be further changes in the future.

The only thing I expect to remain the same is, the longer one waits before collecting it, the larger the monthly benefit will be.

Whether that benefits any particular person in any particular situation is a question I cannot answer.

 

[California]

The only thing I expect to remain the same is, the longer one waits before collecting it, the larger the monthly benefit will be.

Whether that benefits any particular person in any particular situation is a question I cannot answer.

That's where the personal appraisal of one's own life expectancy is probably the most important variable to consider. Waiting longer gives a higher monthly benefit but it also pushes the breakeven point farther into the future. This also assumes you have other resources so starting SS immediately isn't critically important.

 

[Capricious]

That's where the personal appraisal of one's own life expectancy is probably the most important variable to consider. Waiting longer gives a higher monthly benefit but it also pushes the breakeven point farther into the future. This also assumes you have other resources so starting SS immediately isn't critically important.

Just to complicate the picture further: the wife is (7) years younger than I am (and better looking) What she gets after the world is relieved of my presence is also of concern.

Basically, it's a crap-shoot as to when to claim SS because of all the unknowns.

 

[fishheadbob]

Random thoughts. Age 65 for full retirement was a concept originally dreamed up by Otto Bismarck, the iron chancellor, back around 1880 or 1900. People started to live a lot longer so Franklin Roosevelt's age 65 full retirement age had to obviously be adjusted for increased longevity. Probably have to be adjusted again soon as people live an awful long time. SS benefits have been cut back a few times already; not including the demise of "file and suspend". Most of the benefit reductions have been subtle, usually in the replacement rates SS calls computations ( which are insanely complex ) based on a person's lifetime earnings. Folks don't get the rate of return their parents and grandparents got because the replacement rates were traditionally too high in proportion to what was paid in. It was a great way to get re-elected though.

Medicare will be the next mess to hit the fan. The premium ($108 per month) Medicare beneficiaries have deducted from their SS checks used to be based on 25% of the actual cost, but with the skyrocketing of all medical stuff the actual cost is probably gotten to where the $108 is chump change compared to the actual costs. Again, people are living awfully long, using a lot more doctors, hospitals, etc. and the medical industry is booming, most costs are obscene.

I don't understand why some Medicare supplement policies are so outrageously high for some people. I live in N.Y. where the price of everything is high but my medical costs and insurance are cheap. I pay Medicare its' $108, and I have a medicare complementary policy that costs zero. It's good at all hospitals and 99% of the doctors, anesthesiologists always excluded. $20 co-pay at the doctor, my 3 generic prescriptions cost $0 , $0, and the pricey one is $4 .
I think I'd have to pay $300 or $400 per hospitalization. There are other plans similarly priced in my area.
When my brother-in-law moved to Chicago he was convinced he was going to have to pay high insurance rates, but with a little checking he got a zero premium policy that saw him through nicely to his demise. A lengthy final illness with surgeons, oncologists, hospitals, and nursing homes cost him maybe $12,000.

And it is a crapshoot.

 

[RSKY]

Been watching this thread since it came up. You've got a lot of good advice. Me, I like spread sheets to the point that I drive my wife crazy with them. I retired a few days before I turned 57. Had been thinking about it for a couple years but could not make myself do it. I was afraid of running out of money and having to live on beans and rice while not being able to pay for Internet service to keep up on TBN. That was scary. So I made up a bunch of spreadsheets. The main one had columns for the year, pension for me, pension for my wife, Social Security, payments from 401Ks, and other income. The total was added up into columns for monthly and yearly income. The 401Ks had a column for varying the percentage gained or lost.

Next we made up another spreadsheet for expenses. We took each monthly bill for electric, water, gas, etc. and put the highest for the year on the sheet. For example, we heat with gas so out bill is high in the winter but only a couple dollars in the summer. We put the highest monthly total down for our monthly expense. This weighted out expenses to the heavy side. We pay for all our gasoline with a credit card and I have to say I was shocked at how much we spent on gasoline. But once again we put the highest monthly total down as the average. Got all this added up for our monthly expenses.

I was surprised at my total income if I quit work. I was surprised at how much it cost me to work driving 75 miles each day.

My wife and I have insurance coverage from our jobs. So that was out of play except we do have to pay part of it. This was also on our monthly expense sheet.

So I printed it all out with twelve different scenarios on how the stock market would perform and all our expenses. We took this to our accountant and I threw all the papers down on his desk and asked him if I could afford to retire. When I explained what all the figures were he just started laughing. Said most people that came in and asked him that question didn't even know how much they had in their 401K or in the bank and I had twelve different scenarios printed out. Said if I kept up with it that well then I could keep up with it when I retired and we would be okay.

My point is to know what your expenses will be. WRITE IT DOWN or put it on a spread sheet. Figure your expenses high. Then figure up your income. WRITE IT DOWN. Make allowances for emergencies and travel or whatever else you like to do. If your income is greater than your expenses then go for it. Worked a guy who decided one day that, "I've got enough to make it!" and quit work. He never sat down and wrote it out, just figured it out in his head that he had enough money stashed and quit. Ended up losing nearly everything they had and are still working in their seventies. Have seen others work hard all their lives and retire and die two months later. Left all they money they had saved to a bunch of lazy kids.

Anyway, I am rambling, so my advice is sit down with your wife and write it out. Figure how much you MUST spend each month. Figure out how much your income will be each month. Figure out how much you need each month to enjoy the lifestyle you want. If your income is sufficient now then what are you waiting for? Retire and enjoy life. If your income stream isn't sufficient then work a few more years.

Whatever you do, please sit down and figure out what your expenses/income will be so a year after you retire we won't hear about you working as a door greeter for $7.50/hour after quitting a $35/hour job. I know people who have done that.

RSKY

 

[ultrarunner]

Even as a kid I would note in my passbook each deposit and withdrawal...

Made it simple to keep track... then I went to checks and running everything through a checking account is simple and effective.

I do know a few that could easily retire and keep working... one told me just knowing he can retire changed his entire outlook at/towards work... he was not afraid to speak up and or tell the boss he had plans when something hit his desk at the last minute...

At his last review the manager told him he is the only one that every has an opinion and he appreciates it... go figure?

 

[buckeyefarmer]

Been watching this thread since it came up. You've got a lot of good advice. Me, I like spread sheets to the point that I drive my wife crazy with them. I retired a few days before I turned 57. Had been thinking about it for a couple years but could not make myself do it. I was afraid of running out of money and having to live on beans and rice while not being able to pay for Internet service to keep up on TBN. That was scary. So I made up a bunch of spreadsheets. The main one had columns for the year, pension for me, pension for my wife, Social Security, payments from 401Ks, and other income. The total was added up into columns for monthly and yearly income. The 401Ks had a column for varying the percentage gained or lost.

Next we made up another spreadsheet for expenses. We took each monthly bill for electric, water, gas, etc. and put the highest for the year on the sheet. For example, we heat with gas so out bill is high in the winter but only a couple dollars in the summer. We put the highest monthly total down for our monthly expense. This weighted out expenses to the heavy side. We pay for all our gasoline with a credit card and I have to say I was shocked at how much we spent on gasoline. But once again we put the highest monthly total down as the average. Got all this added up for our monthly expenses.

I was surprised at my total income if I quit work. I was surprised at how much it cost me to work driving 75 miles each day.

My wife and I have insurance coverage from our jobs. So that was out of play except we do have to pay part of it. This was also on our monthly expense sheet.

So I printed it all out with twelve different scenarios on how the stock market would perform and all our expenses. We took this to our accountant and I threw all the papers down on his desk and asked him if I could afford to retire. When I explained what all the figures were he just started laughing. Said most people that came in and asked him that question didn't even know how much they had in their 401K or in the bank and I had twelve different scenarios printed out. Said if I kept up with it that well then I could keep up with it when I retired and we would be okay.

My point is to know what your expenses will be. WRITE IT DOWN or put it on a spread sheet. Figure your expenses high. Then figure up your income. WRITE IT DOWN. Make allowances for emergencies and travel or whatever else you like to do. If your income is greater than your expenses then go for it. Worked a guy who decided one day that, "I've got enough to make it!" and quit work. He never sat down and wrote it out, just figured it out in his head that he had enough money stashed and quit. Ended up losing nearly everything they had and are still working in their seventies. Have seen others work hard all their lives and retire and die two months later. Left all they money they had saved to a bunch of lazy kids.

Anyway, I am rambling, so my advice is sit down with your wife and write it out. Figure how much you MUST spend each month. Figure out how much your income will be each month. Figure out how much you need each month to enjoy the lifestyle you want. If your income is sufficient now then what are you waiting for? Retire and enjoy life. If your income stream isn't sufficient then work a few more years.

Whatever you do, please sit down and figure out what your expenses/income will be so a year after you retire we won't hear about you working as a door greeter for $7.50/hour after quitting a $35/hour job. I know people who have done that.

RSKY

Great advice. This is what our Credit union planner did with a friend, and what I am preparing to do.

 

[CurlyDave]

Any insight into social security payments that might not be apparent on the SS website?

When I retired, I had an IRA and a pension. I made up some spreadsheets and came to an interesting conclusion. If you have any savings, you are better off to take Social Security at the first possible opportunity rather than waiting.

Sure you get less money per month, but getting it earlier means you have to take less from your own savings to live and your investments can grow.

There is a concept called the "time value of money" which is simply that a dollar today is worth more than a dollar a year from now. Right now interest rates are low, but this will not always be the case.

For me, if I thought that I could earn any interest at all on my money, the break-even age got older and older for taking SS now vs. waiting. Somewhere around 7% return, I would be better off to take it early even if I lived forever. Plus, there is the intangible factor of I know what is going to happen to my investments much better than I know what the government is going to do with SS. At some point my SS may be "means tested" right out of existence. If I take it now I will at least get some of it.

If you know Excel look up the IRR and NPV functions. You can run your own scenarios.

When the government wants money from me, the know very well the time value of money, and the IRS charges interest on any money that is even a little bit late. But, when it comes to paying money out, time value has somehow been overlooked.

 

[California]

Here's an excellent article describing the advantages and disadvantages of drawing SS early, at 'normal retirement age' or waiting until age 70.

How delaying social security can be the best long term investment or annuity money can buy. Michael Kitces.

The author describes results under two scenarios, either SS payments continue under the same formula for the retiree's lifetime, or, that Congress cuts benefits at the widely-discussed point in the future where revenue is insufficient to fund full benefits.

In all cases the delay to break even is surprisingly long, some 20 years. But after that when the retiree is old and economic conditions are unimaginable from our present perspective, the real inflation-adjusted return begins to match then exceed what ordinary prudent investment can be expected to earn for you. The SS advantage grows year by year after that distant point in the future.

My thoughts were I don't need money now or most importantly, feel I could beat the market consistently for a lifetime, particularly continuing to make excellent investment decisions in and beyond my 80's. I saw my father do that, he kept growing a modest portfolio at a better than average rate until his advice at age 88 in late 1999 was 'this market has peaked, its unsustainable, sell everything the day I die". I did, he was right. How many of us can be that accurate, and lucky in timing, late in life? So for me I chose the more predictable options that made sense to me: Started SS at 'normal retirement age' (66) with wife drawing from mine and deferring her own start until she reaches 70.

As I said, my planning goal was to guarantee comfortable living at 80 and beyond regardless of economic conditions, and regardless of possibly my own investment errors at an advanced age. Mom made it to 98 living comfortably on a good pension and SS, her older sister is still living at 106. Finding a guarantee for my own untroubled, comfortable living (same for wife) at those advanced ages, should either of us live that long, was my planning target.


The comments responding to Kitces' article are also informative. Other financial advisors make subtle related and supporting points, for example that spending down IRA accounts before starting SS can reduce the extent to which SS benefits are taxable later, when SS is received on top of taxable income caused by the Minimum Required Distribution.


The author is a consultant to financial advisor firms, after considerable experience at the various levels in the financial advisor field.

I'm impressed with his thoroughness and expertise. He lists several credentials:

Graduate Degrees and Designations

MSFS Master of Science in Financial Services
MTAX Masters in Taxation
CFP Certified Financial Planner
CLU Chartered Life Underwriter

ChFC Chartered Financial Consultant
RHU Registered Health Underwriter
REBC Registered Employee Benefits Consultant
CASL Chartered Advisor of Senior Living