Social Security break even planning. With or Without COLA's ?

LostDollar

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If you get into retirement planning discussions with your clients that extend to joint Social Security considerations and you need to look at things like second spouse retirement benefits, survivor benefits, and breakeven point computations for taking early social security:

Do you use the figures on the SS Benefit Statements

or

Do you add factors for Cost of Living Adjustments?

If you want to add COLA's, how do you estimate them?

And, how would you go about estimating the spousal benefit provided by someone already on SS who no longer gets that info on a SS benefit stmt?

I specifically want to evaluate the combination of "Early Retirement Benefit" and/or "Spousal Benefit", followed by "Survivor Benefits" at some point, for a younger spouse. I'm having trouble thinking out the right way to do it.

Thanks.
 
If you get into retirement planning discussions with your clients that extend to joint Social Security considerations and you need to look at things like second spouse retirement benefits, survivor benefits, and breakeven point computations for taking early social security:

Do you use the figures on the SS Benefit Statements

or

Do you add factors for Cost of Living Adjustments?

If you want to add COLA's, how do you estimate them?

And, how would you go about estimating the spousal benefit provided by someone already on SS who no longer gets that info on a SS benefit stmt?

I specifically want to evaluate the combination of "Early Retirement Benefit" and/or "Spousal Benefit", followed by "Survivor Benefits" at some point, for a younger spouse. I'm having trouble thinking out the right way to do it.

Thanks.
You can just buy software for like $50 bucks that will let you run every scenario you can imagine.
 
If you get into retirement planning discussions with your clients that extend to joint Social Security considerations and you need to look at things like second spouse retirement benefits, survivor benefits, and breakeven point computations for taking early social security:

Do you use the figures on the SS Benefit Statements

or

Do you add factors for Cost of Living Adjustments?

If you want to add COLA's, how do you estimate them?

And, how would you go about estimating the spousal benefit provided by someone already on SS who no longer gets that info on a SS benefit stmt?

I specifically want to evaluate the combination of "Early Retirement Benefit" and/or "Spousal Benefit", followed by "Survivor Benefits" at some point, for a younger spouse. I'm having trouble thinking out the right way to do it.

Thanks.

The Spouse receives the Full Benefit if they are at full retirement age. Meaning they get the full amount the higher earning spouse was receiving.

Its a sliding scale if they are under age 66. The social security website should show it to you.

----

COLAs are an unknown. There is no right answer. Right now, I use 3%.

Prior to the past 3 years, the yearly average was less then 2% for the 2000s.

----

If neither spouse is working, Usually, taking it as early as possible makes the most sense. Especially with a large age gap.

You have to consider lost opportunity cost of waiting. That is money that could be working for you earning money each year, and its going to end anyway eventually and step-up to the higher amount. So we are talking a shorter time frame vs. all of retirement (for the younger spouse).

Take the money and run in that scenario. jmo from a general perspective.
 
The Spouse receives the Full Benefit if they are at full retirement age. Meaning they get the full amount the higher earning spouse was receiving.

Its a sliding scale if they are under age 66. The social security website should show it to you.

----

COLAs are an unknown. There is no right answer. Right now, I use 3%.

Prior to the past 3 years, the yearly average was less then 2% for the 2000s.

----

If neither spouse is working, Usually, taking it as early as possible makes the most sense. Especially with a large age gap.

You have to consider lost opportunity cost of waiting. That is money that could be working for you earning money each year, and its going to end anyway eventually and step-up to the higher amount. So we are talking a shorter time frame vs. all of retirement (for the younger spouse).

Take the money and run in that scenario. jmo from a general perspective.

But taking early also locks your surviving spouse permanently into a lower amount. Each year delayed bumps SS check for worker & surviving spouse by 8%. Where else can you get an 8% guaranteed return with no cost. Instead of most people taking SS at full retirement or early while at same time delaying qualified plan distribution until require to take RMD at 70/72/74 on a fund with little or no guarantee & many times with fees/costs, why not delay SS & take distributions from qualified plans. Fof manh taxpayers they will also benefit tax wise over the long haul
 
Torrid Tech is pretty good and you can create your own COLA % in their Social Security assumptions:

[EXTERNAL LINK] - Products - Keep It Simple Retirement Planning - Torrid Technologies

Thank you for taking the time to post this. If you are suggesting it, I know it has to be a solid product. However it is also more expensive than I care to deal with at this time.

I would likely need the couples version. And I did not expect the annual renewal costs. It makes sense when you think about it, but I did not expect it and it makes the cost prohibitive in relation to the asset base I have to work with.

Given that I seem to be totally incapable of using Fidelity and Schwab consumer investing sites, I would also question my ability to understand and use that software effectively.
 
If neither spouse is working, Usually, taking it as early as possible makes the most sense. Especially with a large age gap.

I go back & forth on this topic a bit. For each additional year of waiting, it gets an 8% boost, correct? Sometimes, I think it could be smarter (no formal analysis) to spend some non-guaranteed return/income assets like 401k money first &/or do Roth conversions during those early 62-67 years while in low tax brackets & keep the SS checks deferred & growing by 8% as an overall tax play. Especially if the person has other assets to live on to stay in low tax bracket (cash, bank money, Life insurance CV, roth, dividends & interest already being reported)

I honestly have never seen a SS check larger than my dads. Because my mom kept working until 70, she delayed until 70. SS check is 4,800 per month. I handle my dads affairs & have had SS workers tell me the check amount looks like an error when we have to have his withholding adjusted year to year. The workers claim they have never seen an individual check for that amount. Between paying in max SS during working years & delaying until 70, it became a crazy big check I guess
 
I honestly have never seen a SS check larger than my dads. Because my mom kept working until 70, she delayed until 70. SS check is 4,800 per month. I handle my dads affairs & have had SS workers tell me the check amount looks like an error when we have to have his withholding adjusted year to year. The workers claim they have never seen an individual check for that amount. Between paying in max SS during working years & delaying until 70, it became a crazy big check I guess

As you suggest in your post, that check did not come from just waiting until 70 to collect, it also came from very high earnings during working years.
 
As you suggest in your post, that check did not come from just waiting until 70 to collect, it also came from very high earnings during working years.

yes, but had they taken check at 62, the check would have been around $2500 (plus COLA) I believe, not $4,800 . Around 36% of the check is from earnings during working years & 64% due to the delay in starting & COLA
 
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