I just got my annual letter about social security benefits and, now that I am reaching the appropriate age, I ran the math. I was kind of surprised by the outcome.
If I had started receiving benefits at age 64, my monthly check would have been X. At age 66 it becomes X + $198. At age 70, it becomes X + $912.
I had looked at that part before and assumed it was to my bride’s benefit to have me start at age 70. (She’ll outlive me by decades unless she gets hit by a truck.)
But then I looked at the total amount that would be paid out depending on how long she lives, and that is where the surprise came. If I had started at age 64, the total would have been biggest if she lived to 80. If she lives to 85, she’ll be best off by my starting at age 66. If I wait to start until I’m 70 she won’t get the most in total until she reaches age 90.
I had expected when I started this exercise that the totals would be closer. And I have not done any present value calculations to adjust the amount. Present value adjustments would make taking it early even more attractive.
Something to think about for those of you looking at retirement.
So how old are you now? I’ll be 63 this month and my benefits are X. If I work till I’m 66 my benefits will be about X + $300. If I work until I’m 70, my benefits will be about X + $700. I’m pretty close to not being able to work anymore and if I get SSI disability, my benefits would be about what I’d get if I worked until I was 70. But getting SSI disability is like trying to pull teeth from a chicken. You have to give 15% or so to a lawyer of every month’s benefits just to get approved. Where’s the justice?
I’ll be eligible in a couple of months. Figuring this all out has taken me days of research!
It really gets tricky if you have a spouse who is eligible for Social Security at a different monthly rate than you have earned. You need to run a bunch of scenarios as to which spouse dies first, when, and when each spouse should apply for their earned benefits.
Then you have to analyze Medicare, which is even more complicated.
All of this stuff is way more complicated than it should be. I have a very good IQ (no brag, just fact) and a business background that trained me to be analytical. But figuring out Social Security and Medicare has taken me way more time than it should have. I’m not sure that a majority of people can do so and reach the right decision. Heck, I’m also not sure if I have reached the right decisions, but at least I know that I studied the heck out of them.
My bride brought in a “consultant” to help her with her decisions. I sat in on that meeting and learned a lot. I also learned that the “consultant” was a commissioned sales agent who was not exactly unbiased. As it turns out, she did give my bride some good advice. But she also tried to steer me the same way and it was really not the right direction for me. Indeed, it was about 180 degrees off. This is not a “one size fits all” arena.
Caveat emptor and plan on spending some serious research time on this once you get close to retirement age.
Not to bring the conversation down at all, but I am only 30, and I think that by the time I get to retirement age my social security benefit will be $0 no matter how I figure it out…
Hugefish at least you are smart enough to realize you cannot count on the govt. to return the money they are and will continue to take from you while you are young enough to make your own plans. However, there are those in high positions that would take your 401K and other retirement program and put the under govt. control. If I were your age I would consider some of the countries in South America very carefully if the good old USA continues to tumble toward socialism.
Attended three seminars before retirement. During the Social Security benefits part the instructor asked how many in the room would take early benefits as opposed to waiting till they were fully eligible. No hands went up for early benefits. This was his explanation as why he’d take it early. At the time I retired, six years ago, my wife and I both filed for early benefits which started then three years before we reached full benefits age. At that time the instructor explained that benefits were reduced to 80% of full benefits if you elected an early start date; so, for three years we’d collect 80% of full benefits. Then, upon reaching full benefit age in three years we’d still only collect 80% for the rest of our life. BUT - he then asked how long it would be before we’d actually start losing any money. His explanation was that we’d collect 80% of full benefits three years early and then continue with this ratio. Therefore, we’d only lose 20% of full benefits each year but it would take TWELVE years before we really lost any money cause we had already earned 80% a year for the previous three years. SO, dividing 20% into 80% for three years and your benefits wouldn’t reduce any for TWELVE years after you reached full benefit age. In our case we’d have to live till age 77 before our actual benefits would really be reduced and then only by 20% per year. After this explanation every person in the room said they planned to file for early benefits as soon as they were eligible. The rules have changed a mite since then, I think, so youd have to check on it and do the math yourself to see if you think it would be worth it to apply early.
Boy do I hear you on that! After years of government raiding of the system and now the largest generation about to retire you and I are sunk. Invest wisely my friend. Don’t rely on Uncle Sam to do it for you, unless you really do have a rich Uncle Sam.
Th other day this very type of conversation came up at work. A baby boom friend of mine said he was about to retire and make us generation x types take care of him. I told him that was alright because bullets are still cheap. We were joking of course.
I wonder what those of us that have paid into SS all our working lives would be worth had we been allowed to put the $ in an account that earned even just 1% interest?
Seems like that at the 45 (for me) year point of working and paying in, there would be more available than i’m receiving each month. Wonder if there’s an ap for that?
It is not a terribly hard calculation to do. I’ve done it for myself and used the annual S&P 500 return. It is depressing to learn what I would have / could have had. I don’t recommend you do it. It won’t make you happy.
I’m just thinking it would be a lot simpler if all we’ve paid in could have been self managed with the stipulation that it couldn’t be touched until say age 55, which i think is a much more reasonable
retirement age in the first place. Yes, i can imagine the money paid in would be returning a whole lot more than it is had not the gov been ‘manipulating’ the funds so to speak.
Starting with a balance of $0 contributing $375 per month (15% of $30,000 annual average salary) at 1% compounded daily at 45 years the Final Savings Balance: $ 255633.08. I believe the stock market averages approx. 8% annually which calculates to $ 1,995,135.39.
Your calculations are probably correct, using the plain old mathamatatics you lernt in the 6th grade. But when you factor in the new and improved govmint algebraic computative crystal ball method, you would actually owe the govmint a dollar three eighty + tax. You can’t make this stuff up! (unless your the govmint that is) You can do the math, but don’t bother because you don’t have the formula, which is locked up deep in a vault beneath Fort Knox, or Cheyenne Mountain, or Area 51! LOL!!! Hope I’ve shed some light on how this whole GNP,IRS,NYSE,Tooth Fairy thing works! If nothing else, you could always check under your mattress! If you find anything I get half. Right? This lifetime of dubious wisdom did not come free you know. I had to work at it real hard to become this money smart/savvy/economically insolvent. Oops, I mean solvent. Yea! Right!
I cheated and used a on-line interest calculator where you just plugged in the number and waited for an answer.
I am real happy with the govt. this week I just learned the first of the year I am going to be required to pay the government for medicare coverage which will be no better than the Tricare I have used the last couple of years.
I’d go with the former since the i doubt the government has even returned 2% on my investment, so by the looks of it i’ll get the whole thing back in about 20 more years of drawing if they let me…i’m inclluding
presumed colas and kickers like we had a couple years ago.
