The Biggest Mistakes People Make With Social Security

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RickBoglehead
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The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

WSJ, 5/11/21

1) Worrying About Dying Too Young
2) Waiting Too Long To Claim
3) Not Working Because Of The Earnings Limit
4) Not Filing For Widow's or Widower's Benefits
5) Getting Divorced
6) Hitting Tax Torpedoes

The Biggest Mistakes People Make With Social Security
https://wallstreetjournal-ny-app.newsme ... =0c5fb0c49
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Re: The Biggest Mistakes People Make With Social Security

Post by happysteward »

Yes number 3 was interesting...anyone doing this?
3.

If you claim Social Security before Jan. 1 of the year you reach full retirement age, and earn more than $18,960, the government will reduce your benefit by $1 for every $2 of earnings in excess of that amount. People turn down work because of that rule.

They shouldn’t. In most cases, they will get back the money they lost because the government will adjust their benefit upward once they reach full retirement age, as if they had waited to start collecting it. It is the equivalent of a do-over for those who started Social Security too early.

“It does precisely what you want, which is to take money that you don’t need now, and give it to you later when you do need it,” says Dr. Munnell of the Center for Retirement Research. So if you lost your job because of the pandemic-related lockdowns and had to start drawing Social Security to stay afloat, fret not. You can go back to work and exceed the earnings cap, even as you continue to bulk up your Social Security benefits down the road.
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

Many clients file for Social Security benefits earlier than necessary because they fret about not living long enough to get all their money back from the government program.
Your clients maybe but the general population it's more to get there money now to spend it.
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
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Re: The Biggest Mistakes People Make With Social Security

Post by vested1 »

RickBoglehead wrote: Tue May 11, 2021 6:18 am WSJ, 5/11/21

1) Worrying About Dying Too Young
2) Waiting Too Long To Claim
3) Not Working Because Of The Earnings Limit
4) Not Filing For Widow's or Widower's Benefits
5) Getting Divorced
6) Hitting Tax Torpedoes

The Biggest Mistakes People Make With Social Security
https://wallstreetjournal-ny-app.newsme ... =0c5fb0c49
Maybe I missed it, but I didn't see #1 stressed in the article. Most of what was identified as a mistake centered around filing too soon.
“If you have a high-earner couple who earned the max and don’t claim until 70, you’re talking about [getting] the better part of $100,000 a year,” says Alicia Munnell, the center’s director. “You have to be very wealthy before you don’t consider that important.”
We’ve talked to academics, financial advisers and a certified public accountant to identify the biggest Social Security mistakes people make. They say too many people claim it early, putting themselves at risk of outliving their assets./quote]


1.

Many clients file for Social Security benefits earlier than necessary because they fret about not living long enough to get all their money back from the government program.

They have it all backward, according to Boston University economist Laurence Kotlikoff, who heads a firm that sells Maximize My Social Security software, which helps people determine when to start collecting their benefit.

Social Security is longevity insurance, he says. That is, it offers protection against running out of money as we age. People don’t do break-even calculations when they buy home insurance, because they are protecting themselves against a catastrophic event like a fire. They shouldn’t do them with Social Security either, he says./quote]

The underlined section is the perfect argument against using break-even calculations when deciding when to file, but not the only one. SS is income, not a lump sum.
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Re: The Biggest Mistakes People Make With Social Security

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Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

#6 - The Tax Torpedo discussion is good because it highlights areas that we don't always discuss on BH regarding the value of delaying SS. Most discussions seem to focus on Roth Conversion (yes very valuable).

He points out one benefit of delaying SS is that you can essentially convert RMDs to higher SS benefits. In my case where my age, lifetime investing decisions (Roth's were not available to me before 2010 and I didn't learn about back-door conversions until 2017) and certain events have left us with entirely too large a percentage of my retirement funds in a tax-deferred account, this shift is probably at least as valuable as the room to to do Roth conversions since it essentially doesn't have a current marginal tax cost during the intervening years (I spend from tax-deferred now to lower RMD later).

I am going to be spending the next decade finding every way to convert tax-deferred wealth into either deferred income streams (SS), Roth conversions or preserving taxable accounts to get the balance between accounts better. All this is driven by a real tax torpedo (maybe bomb) when the first of us meets our heavenly reward.
Last edited by retiringwhen on Tue May 11, 2021 9:57 am, edited 1 time in total.
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
I agree with you it's debatable between view A/B. But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70. I'm guessing a large percentage of those 94% will regret there decision.
I know to many that have regretted there choice
Last edited by Johm221122 on Tue May 11, 2021 8:34 am, edited 1 time in total.
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Re: The Biggest Mistakes People Make With Social Security

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Personally
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Re: The Biggest Mistakes People Make With Social Security

Post by aprilcpa »

My husband and I will collect SS at age 62. Longevity is not in our genes.
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Re: The Biggest Mistakes People Make With Social Security

Post by David Jay »

Johm221122 wrote: Tue May 11, 2021 8:32 amI agree with you it's debatable between view A/B.
Actually, my point is that it is not very debatable. In most cases, how one perceives the question almost invariably determines the answer. So folks “talk past” each other and do not really debate.
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

David Jay wrote: Tue May 11, 2021 8:03 am This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
With regard to the married context though, the "annuity" view is complicated. Because planning for a "both of us live to be 100" scenario leads a couple to make a claiming decision that actually worsens the outcome in the "one of us lives to be 100 and the other dies roughly at, or before, his/her life expectancy" scenario. And for many couples, that's still a risky (i.e., potentially problematic) scenario -- and it's much more likely. So even ignoring ROI and looking purely from a risk-reduction standpoint, the benefit of having the lower earner wait is not so clear.

Of course, for the higher earner, either view indicates that that person should wait until 70 (assuming none of the various complicating factors apply, such as a minor child in the household).
Last edited by ObliviousInvestor on Tue May 11, 2021 8:44 am, edited 1 time in total.
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Re: The Biggest Mistakes People Make With Social Security

Post by dodecahedron »

Johm221122 wrote: Tue May 11, 2021 8:32 am But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70.
There is one significant category you are leaving out among your characterizations of the 94%: folks whose benefits maximize prior to age 70.

Folks filing for surviving spouse benefits do not benefit from waiting until age 70, for example. Those benefits maximize at full-retirement-age.

Other folks (e.g., lower earning spouses who qualify for spousal benefits of a higher earning living spouse that greatly exceed their own work-record benefits, older parents/guardians of young or disabled children who qualify for dependent benefits) may also fall into the category of folks whose benefits maximize prior to age 70.
Last edited by dodecahedron on Tue May 11, 2021 8:50 am, edited 3 times in total.
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Re: The Biggest Mistakes People Make With Social Security

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aprilcpa wrote: Tue May 11, 2021 8:41 am My husband and I will collect SS at age 62. Longevity is not in our genes.
Do you fully understand how the survivor’s benefit functions?
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Re: The Biggest Mistakes People Make With Social Security

Post by Flashes1 »

I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

David Jay wrote: Tue May 11, 2021 8:42 am
Johm221122 wrote: Tue May 11, 2021 8:32 amI agree with you it's debatable between view A/B.
Actually, my point is that it is not very debatable. In most cases, how one perceives the question almost invariably determines the answer. So folks “talk past” each other and do not really debate.
Also, many people who take the ROI view use flawed calculations, because of lack of understanding of opportunity cost/present value/fungibility concepts. So that muddies the conversations as well. In other words, there's roughly two camps (both of which are reasonable), but within each camp a good chunk of people don't really understand the concepts very well.
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Re: The Biggest Mistakes People Make With Social Security

Post by JackoC »

Johm221122 wrote: Tue May 11, 2021 8:32 am
David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
I agree with you it's debatable between view A/B. But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70. I'm guessing a large percentage of those 94% will regret there decision.
I know to many that have regretted there choice
The good news about the population's overall state of mind is how good most people are at telling themselves they made the right decision when they didn't. :happy Although, you get a further distorted impression of that if you ask them, because then it also includes people who know they made a wrong decision but don't want to admit it.

On 94%, the great majority need the money. And a pure contest between A and B would only be where there's really no difference in affordable living standard between ages and 62 or FRA and 70 depending on whether you wait till 70 to take SS. That's fairly rare across all people in the US, and I think often not true even here among people arguing for A. So they aren't really purely arguing for A, they also kind of need the money. Which again could be viewed as good news, since A is pretty irrational if you can easily afford to wait, and aren't in poor health. Speaking of which poor health or objectively low life expectancy is a valid reason not to wait but it doesn't seem it's actually that common an independent reason people choose not to wait (IOW if you can't work anymore because of poor health and need SS as soon as you can't work, a common case, that's connected to poor health but not independent of needing the money).
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

dodecahedron wrote: Tue May 11, 2021 8:44 am
Johm221122 wrote: Tue May 11, 2021 8:32 am But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70.
There is one significant category you are leaving out among your characterizations of the 94%: folks whose benefits maximize prior to age 70.

Folks filing for surviving spouse benefits do not benefit from waiting until age 70, for example. Those benefits maximize at full-retirement-age.

Other folks (e.g., lower earning spouses who qualify for spousal benefits of a higher earning living spouse that greatly exceed their own work-record benefits, older parents/guardians of young or disabled children who qualify for dependent benefits) may also fall into the category of folks whose benefits maximize prior to age 70.
Yes, I realized I'm missing many categories of those 94%.
My point there are many that really regret not waiting. I've seen too many really mess up there future. I've seen some really bad choices made by people. I currently have two friends that are really in bad shape because of the choice they made to collect at 62. One is 76 and working full time because of need and the other is 63 and hoping he can work two physical job till 75
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Re: The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

ObliviousInvestor wrote: Tue May 11, 2021 8:48 am Also, many people who take the ROI view use flawed calculations, because of lack of understanding of opportunity cost/present value/fungibility concepts. So that muddies the conversations as well. In other words, there's roughly two camps (both of which are reasonable), but within each camp a good chunk of people don't really understand the concepts very well.
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
It's pretty clear that the majority of the population doesn't understand most financial concepts very well, and Social Security is not an exception.

As to most people NEEDING their Social Security prior to FRA, I'll bet many of them could go on a few more years without it, either working longer or tightening up on expenses, to get a higher benefit, IF they knew and understood the math.

We have a friend who is literally brilliant. Her husband's belief is that his life expectancy is not long, so he started collecting at age 62. Her plan was to collect at age 62 also, but she did no analysis. When I asked her what tool she had used to determine that, she had no answer.
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Re: The Biggest Mistakes People Make With Social Security

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retiringwhen wrote: Tue May 11, 2021 8:31 am #6 - The Tax Torpedo discussion is good because it highlights areas that we don't always discuss on BH regarding the value of delaying SS. Most discussions seem to focus on Roth Conversion (yes very valuable).

He points out one benefit of delaying SS is that you can essentially convert RMDs to higher SS benefits. In my case where my age, lifetime investing decisions (Roth's were not available before 2010 and I didn't learn about back-door conversions until 2017) and certain events have left us with entirely too large a percentage of my retirement funds in a tax-deferred account, this shift is probably at least as valuable as the room to to do Roth conversions since it essentially doesn't have a current marginal tax cost during the intervening years (I spend from tax-deferred now to lower RMD later).

I am going to be spending the next decade finding every way to convert tax-deferred wealth into either deferred income streams (SS), Roth conversions or preserving taxable accounts to get the balance between accounts better. All this is driven by a real tax torpedo (maybe bomb) when the first of us meets our heavenly reward.
Roth IRAs were first available in 1998. My first Roth was for the 1999 tax year . Perhaps you mean that you were not able to contribute to a Roth until 2010.

My plan is to do Roth conversions more for my wife when I pass.

She will be facing large percentages for RMDs on tax deferred accounts at the same time as she would be filing as a single, and with the levels for the percent of SS that is taxable being lower than for a couple. I have little doubt that she will be a widow rather that vice versa.
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Re: The Biggest Mistakes People Make With Social Security

Post by rich126 »

Maybe I'm way off but I think most people claim it because they need it. Obviously that isn't true for most people here. And the next reason I think is due to getting money now is better than getting it later because they really don't expect to be living until 80+ (often the break even point).
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Re: The Biggest Mistakes People Make With Social Security

Post by lazynovice »

Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
I 100% agreed with this post until the last sentence. We have a high 7 figure net worth and SS is more than play money for us. The PV of SS is seven figures no matter when we claim it. It makes a big difference in likelihood of portfolio depletion in an early retirement scenario. Unless you consider early retirement “play” and then I agree with that as well.

To your larger point, a large segment of society will retire with social security and nothing else. And they will be fine until they need long term care etc. when they become dependent on Medicaid.
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

MathWizard wrote: Tue May 11, 2021 9:29 am Perhaps you mean that you were not able to contribute to a Roth until 2010.
Correct, I was not eligible due to income restrictions before 2010. The 2000s was the decade of my highest income and prime investing years.
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Re: The Biggest Mistakes People Make With Social Security

Post by JackoC »

RickBoglehead wrote: Tue May 11, 2021 9:16 am
ObliviousInvestor wrote: Tue May 11, 2021 8:48 am Also, many people who take the ROI view use flawed calculations, because of lack of understanding of opportunity cost/present value/fungibility concepts. So that muddies the conversations as well. In other words, there's roughly two camps (both of which are reasonable), but within each camp a good chunk of people don't really understand the concepts very well.
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
As to most people NEEDING their Social Security prior to FRA, I'll bet many of them could go on a few more years without it, either working longer or tightening up on expenses, to get a higher benefit, IF they knew and understood the math.
But that case still IMO counts as 'need the money', it's not purely (the largely irrational) position A. If you *could* make it 70 but only by making sacrifices like cutting expenses or working more, it depends how highly you value not having to cut expenses and not having to work more.

Not to belabor, but my main take on this is that it's really not very often purely position A v B. The great majority of people who say their approach is A also need the money to some degree, though on this forum it's less likely 'NEED' (a large proportion of the 94% nationally) and more likely 'kind of need', as in not wanting to cut a budget or work more years. Which makes it a preference issue.

But if you really don't need it, you don't have to lower living standard or work any more years to wait, then I think A is pretty irrational. It makes a game ('break even') out of something serious, with all the real downside from taking it early (ie. greater chance you eventually end up still alive without enough money, whereas if you die early...dead people don't need money :happy ).
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Re: The Biggest Mistakes People Make With Social Security

Post by CFM300 »

ObliviousInvestor wrote: Tue May 11, 2021 8:43 am With regard to the married context though, the "annuity" view is complicated. Because planning for a "both of us live to be 100" scenario leads a couple to make a claiming decision that actually worsens the outcome in the "one of us lives to be 100 and the other dies roughly at, or before, his/her life expectancy" scenario. And for many couples, that's still a risky (i.e., potentially problematic) scenario -- and it's much more likely. So even ignoring ROI and looking purely from a risk-reduction standpoint, the benefit of having the lower earner wait is not so clear.
Suppose a couple decides to have the lower earner file at 62 and the higher earner file at 70. What happens to the lower earner's benefit if the higher earner dies before 70? I'm not posing this as a challenge to anything you've written. It's a sincere question about the mechanics of the system.
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Re: The Biggest Mistakes People Make With Social Security

Post by tibbitts »

Johm221122 wrote: Tue May 11, 2021 8:32 am I'm guessing a large percentage of those 94% will regret there decision.
I know to many that have regretted there choice
That's almost a perfect definition of survivorship bias, though.
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

tibbitts wrote: Tue May 11, 2021 10:05 am
Johm221122 wrote: Tue May 11, 2021 8:32 am I'm guessing a large percentage of those 94% will regret there decision.
I know to many that have regretted there choice
That's almost a perfect definition of survivorship bias, though.
Yes and I thought same thing when I wrote it. But the ones who survive in many cases really need as those who don't survive have less personal need for it after there gone
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

CFM300 wrote: Tue May 11, 2021 10:03 am
ObliviousInvestor wrote: Tue May 11, 2021 8:43 am With regard to the married context though, the "annuity" view is complicated. Because planning for a "both of us live to be 100" scenario leads a couple to make a claiming decision that actually worsens the outcome in the "one of us lives to be 100 and the other dies roughly at, or before, his/her life expectancy" scenario. And for many couples, that's still a risky (i.e., potentially problematic) scenario -- and it's much more likely. So even ignoring ROI and looking purely from a risk-reduction standpoint, the benefit of having the lower earner wait is not so clear.
Suppose a couple decides to have the lower earner file at 62 and the higher earner file at 70. What happens to the lower earner's benefit if the higher earner dies before 70? I'm not posing this as a challenge to anything you've written. It's a sincere question about the mechanics of the system.
Lower earner continues to receive his/her own retirement benefit. Then, when the lower earner files for a survivor benefit (assuming they wait until their survivor FRA), their total monthly benefit would be:
1) The higher earner's PIA, if the higher earned died before their own FRA, or
2) The amount the higher earner would have received if they had filed on their date of death, if the higher earner died after their own FRA.

Example:

Spouse A has a PIA of $600. Spouse B has a PIA of $2,000.

Spouse A files 48 months prior to their FRA, so they get a retirement benefit of $450 (75% of PIA due to 48 months early).

Spouse B dies 24 months after their FRA, without yet having filed. Spouse A continues to receive their own $450/month. And when they file for a survivor benefit (assuming they've reached their own survivor FRA at that point), they would get a survivor benefit of $1,870. That is, it would be enough to bring their total monthly benefit up to 116% of Spouse B's PIA, because Spouse B died 24 months after their own FRA.

Edited to add: Note that in this example if Spouse A waited somewhat longer, any dollar increase in their own retirement benefit would be offset by a decrease in the survivor benefit. For example if they filed 36 months early instead of 48, and were therefore receiving $480/month instead of $450, their survivor benefit would be $1840 -- again, whatever is necessary to bring the total up to 116% of Spouse B's PIA. (Key point being that waiting resulted in a higher benefit -- but only for as long as both people were still alive.)
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Re: The Biggest Mistakes People Make With Social Security

Post by lazynovice »

Johm221122 wrote: Tue May 11, 2021 9:13 am
dodecahedron wrote: Tue May 11, 2021 8:44 am
Johm221122 wrote: Tue May 11, 2021 8:32 am But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70.
There is one significant category you are leaving out among your characterizations of the 94%: folks whose benefits maximize prior to age 70.

Folks filing for surviving spouse benefits do not benefit from waiting until age 70, for example. Those benefits maximize at full-retirement-age.

Other folks (e.g., lower earning spouses who qualify for spousal benefits of a higher earning living spouse that greatly exceed their own work-record benefits, older parents/guardians of young or disabled children who qualify for dependent benefits) may also fall into the category of folks whose benefits maximize prior to age 70.
Yes, I realized I'm missing many categories of those 94%.
My point there are many that really regret not waiting. I've seen too many really mess up there future. I've seen some really bad choices made by people. I currently have two friends that are really in bad shape because of the choice they made to collect at 62. One is 76 and working full time because of need and the other is 63 and hoping he can work two physical job till 75
But as to the article’s point #3, it seems they were adjusted up if they were working from 62 to 66?
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

RE: #3 and adjustments after continuing to work.

What if I have 35 years of maximum earnings in the bank, take SS at 62, then continue to work between 62 and FRA but at a much reduced level (let's $25K/year), does this math still work? Basically does it removes the early claiming penalty without impacting the PIA amount?

Mike (aka CAPT Oblivious, I always think of that hotels.com guy :D ) is that something I can model in your tool?
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

retiringwhen wrote: Tue May 11, 2021 10:31 am RE: #3 and adjustments after continuing to work.

What if I have 35 years of maximum earnings in the bank, take SS at 62, then continue to work between 62 and FRA but at a much reduced level (let's $25K/year), does this math still work? Basically does it removes the early claiming penalty without impacting the PIA amount?

Mike (aka CAPT Oblivious, I always think of that hotels.com guy :D ) is that something I can model in your tool?
Open Social Security does account for the earnings test. As far as PIA, it just accepts your input.
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

lazynovice wrote: Tue May 11, 2021 10:25 am
Johm221122 wrote: Tue May 11, 2021 9:13 am
dodecahedron wrote: Tue May 11, 2021 8:44 am
Johm221122 wrote: Tue May 11, 2021 8:32 am But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70.
There is one significant category you are leaving out among your characterizations of the 94%: folks whose benefits maximize prior to age 70.

Folks filing for surviving spouse benefits do not benefit from waiting until age 70, for example. Those benefits maximize at full-retirement-age.

Other folks (e.g., lower earning spouses who qualify for spousal benefits of a higher earning living spouse that greatly exceed their own work-record benefits, older parents/guardians of young or disabled children who qualify for dependent benefits) may also fall into the category of folks whose benefits maximize prior to age 70.
Yes, I realized I'm missing many categories of those 94%.
My point there are many that really regret not waiting. I've seen too many really mess up there future. I've seen some really bad choices made by people. I currently have two friends that are really in bad shape because of the choice they made to collect at 62. One is 76 and working full time because of need and the other is 63 and hoping he can work two physical job till 75
But as to the article’s point #3, it seems they were adjusted up if they were working from 62 to 66?
I'm not 100% sure but my friend is who 76 definitely just has gotten small increases. Someone else could explain this better. Adjusted up isn't the same as original difference
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

The point being made in the article as to the earnings test is that it can negate or reduce the effect of having filed early. Example: you file 40 months prior to your FRA, but then the earnings test results in your benefit being withheld fully or partially for 22 of those months. Effective as of your FRA, your monthly benefit would be adjusted upward to what it would be if you had filed 18 months early instead of 22.

This is completely separate from any effect that the additional years of earnings might have on your AIME/PIA.
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

Johm221122 wrote: Tue May 11, 2021 7:00 am
Many clients file for Social Security benefits earlier than necessary because they fret about not living long enough to get all their money back from the government program.
Your clients maybe but the general population it's more to get there money now to spend it.
I suspect that both are true for many who take benefits early (i.e., spend the money and get as much money back as they can before they die).
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
Very well said! :sharebeer
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Re: The Biggest Mistakes People Make With Social Security

Post by ajcp »

lazynovice wrote: Tue May 11, 2021 9:49 am
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
I 100% agreed with this post until the last sentence. We have a high 7 figure net worth and SS is more than play money for us. The PV of SS is seven figures no matter when we claim it. It makes a big difference in likelihood of portfolio depletion in an early retirement scenario. Unless you consider early retirement “play” and then I agree with that as well.

To your larger point, a large segment of society will retire with social security and nothing else. And they will be fine until they need long term care etc. when they become dependent on Medicaid.
I also don't think SS is play money (in that they wouldn't be affected at all if it went to 0) for most people here, but I would say that most people here have enough of a cushion that the difference between the choice they take and the "optimal" choice is very unlikely to matter much at all to them when it's all said and done.
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Re: The Biggest Mistakes People Make With Social Security

Post by CFM300 »

ObliviousInvestor wrote: Tue May 11, 2021 10:09 amanswer + example + insight
Thank you so much for taking the time to answer my question, providing a clear example and additional insight. I now understand that the risk of the lower-earner filing early is not as great as I thought it might be. Thanks again.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
If you read the article, they point out:

- that can you get benefits if your marriage lasts 10 years (so if you were close to 10 years, you might hang on)
- that you can't get those benefits if you remarry, which someone might take into account and just live with someone
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

Johm221122 wrote: Tue May 11, 2021 9:13 am My point there are many that really regret not waiting.
That interesting.

I don't know anyone who actually regrets not waiting to start their own benefits.
I do know some widows who regret their husbands' choice of claiming strategy.
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

RickBoglehead wrote: Wed May 12, 2021 12:06 pm
JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
If you read the article, they point out:

- that can you get benefits if your marriage lasts 10 years (so if you were close to 10 years, you might hang on)
- that you can't get those benefits if you remarry, which someone might take into account and just live with someone
Thus, getting divorced wasn't the mistake.

Not waiting at least 10 years to get divorced might be a mistake with regard to social security benefits. And getting remarried rather than choosing to live together might be a mistake with regard to social security benefits.

Ridiculous.

By this definition, dying is a mistake.
(when you die before maximizing your spouse's survivor benefits at 70).
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by ponyboy »

Most people take SS before 70. Makes very little sense to wait that long to take back what is yours.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

ponyboy wrote: Wed May 12, 2021 12:15 pm Most people take SS before 70. Makes very little sense to wait that long to take back what is yours.
Yup. That's what some people use to justify taking SS before it can provide them the maximum lifetime benefit.

My misguided brother in law did the same. "I don't want the government to keep my money a minute longer than they have to."
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by AQ »

A trivial question but hope to get a direct answer: Suppose my own SS payment would be $2K monthly, and my spouse is a homemaker and doesn't have own SS benefit. For my planning purpose, can I assume together we'll get $3K?
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Re: The Biggest Mistakes People Make With Social Security

Post by Colorado Guy »

JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
In my case, I was married over 10 years, then divorced and remained unmarried. Years later (unrelated to the divorce), she died. When reading the book Social Security for Dummies, realized that I could actually get a survivor's benefit based on her earning history. I expected a survivor benefit for married couples, but not for divorced couples. Pretty surprised about that to be honest. While not $$$, it does help reinforce the desire to hold off on my SS until 70-ish, and keeps me from accessing my IRA as much.
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Re: The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

AQ wrote: Wed May 12, 2021 12:22 pm A trivial question but hope to get a direct answer: Suppose my own SS payment would be $2K monthly, and my spouse is a homemaker and doesn't have own SS benefit. For my planning purpose, can I assume together we'll get $3K?
Use Open Social Security and you'll see exactly what she'll get depending on when she files.
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Re: The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

Colorado Guy wrote: Wed May 12, 2021 12:26 pm
JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
In my case, I was married over 10 years, then divorced and remained unmarried. Years later (unrelated to the divorce), she died. When reading the book Social Security for Dummies, realized that I could actually get a survivor's benefit based on her earning history. I expected a survivor benefit for married couples, but not for divorced couples. Pretty surprised about that to be honest. While not $$$, it does help reinforce the desire to hold off on my SS until 70-ish, and keeps me from accessing my IRA as much.
Right.

My mother was divorced nearly 20 years when she began collecting Social Security based on her ex's benefit. When he died, she was surprised to see her benefit increase.
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Re: The Biggest Mistakes People Make With Social Security

Post by jackbeagle »

If you file at 62, I have heard there is an earnings cap, which once met, reduces your benefit dollar-for-dollar. Does your earnings cap get lifted when you turn 67? How does that work?
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Re: The Biggest Mistakes People Make With Social Security

Post by RickBoglehead »

jackbeagle wrote: Wed May 12, 2021 12:33 pm If you file at 62, I have heard there is an earnings cap, which once met, reduces your benefit dollar-for-dollar. Does your earnings cap get lifted when you turn 67? How does that work?
You can earn as much money when you want once you reach your FRA (Full Retirement Age). Your FRA depends on your age. https://www.ssa.gov/benefits/retirement ... ction.html

Benefits are not reduced dollar for dollar before FRA. How much they are reduced depends on your age. https://www.ssa.gov/pubs/EN-05-10069.pdf and https://www.ssa.gov/pubs/EN-05-10069.pdf
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Re: The Biggest Mistakes People Make With Social Security

Post by vested1 »

Always learning something new.

I have a friend who was married to a woman 10 years younger than him for over 10 years before getting divorced 30 years ago. He got remarried and is delaying his own SS benefit until age 70. His ex got remarried but that marriage only lasted a few months. The ex is under the impression that she can file for spousal benefits on my friend's SS and get survivor benefits based on what he was getting when he dies.

The ex-wife only earned enough on her own to get a small SS benefit. Is she not able to file for spousal or a survivor benefit on my friend's benefit because she got remarried for a couple months, and also not able to file on her more recent husband's benefit because they weren't married for 10 years?

If that's the case I think we have a new winner for biggest mistake with Social Security.
Last edited by vested1 on Wed May 12, 2021 1:14 pm, edited 1 time in total.
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