basspond wrote: ↑Wed Jul 31, 2019 8:46 pmRemember the government figures that on average the amount will be the same for whatever time you decide to take.
If by the "amount", you mean the
discounted present value (PV), this may be true, basspond. For example, the PV of SS benefits for someone with a Normal Retirement Age (NRA) of 67 who lives until age 82, when discounted at 1.5%, is about the same whether benefits begin at age 62 or at age 70. (And the PV is roughly the same if benefits are started at any age between 62 and 70.) This is illustrated by the blue line second from the bottom of the following graph.
However, keeping the discount rate at 1.5%, the present values
will not be the same if benefits run for a much shorter or longer period. 20 years is the life expectancy of a 62 year old man according to the
SSA 2016 Period Life Table. But according to this same mortality table the life expectancy of a 62 year old
woman is 23 years. And also based on this same mortality table the life expectancy of at least one of a male / female
couple both age 62 is 27 years. And the expectancy for
both of the same couple being alive is 16 years. [1] The yellow, red, and purple lines graph the present values if benefits continue this long. It's apparent that they are
not "the same for whatever time you decide to take".
The purple line at the top and the yellow line at the bottom pertain to the case of the high earner and the low earner of a couple deciding when each should start taking SS benefits. The higher benefit will continue while
either is alive; but the lower benefit will continue only while
both are alive. The two curves illustrate that it is generally better for the high earner to start at 70, and the low earner to start at 62.
Here are the figures upon which the graph is based:
Code: Select all
Row Col A Col B Col C Col D Col E Col F
1 Born 1960
2 NRA 67.000
3 PIA 1,000
4 Rate 1.5%
5 Die 78 82 85 89
Start Pct PIA ---------- Present Value ---------
Code: Select all
7 62.00 70.000% 118,703 144,217 162,379 185,368
8 62.25 71.250% 118,705 144,674 163,161 186,560
9 62.50 72.500% 118,640 145,065 163,877 187,687
10 62.75 73.750% 118,510 145,391 164,527 188,747
11 63.00 75.000% 118,314 145,651 165,111 189,742
12 63.25 76.250% 118,053 145,845 165,630 190,671
13 63.50 77.500% 117,728 145,975 166,084 191,536
14 63.75 78.750% 117,338 146,041 166,474 192,336
15 64.00 80.000% 116,884 146,042 166,800 193,073 [2]
16 64.25 81.667% 116,963 146,729 167,919 194,739
17 64.50 83.333% 116,954 147,328 168,950 196,318
18 64.75 85.000% 116,859 147,841 169,895 197,810
19 65.00 86.667% 116,678 148,267 170,754 199,216
20 65.25 88.333% 116,411 148,608 171,527 200,537
21 65.50 90.000% 116,059 148,863 172,215 201,772
22 65.75 91.667% 115,622 149,033 172,818 202,922
23 66.00 93.333% 115,101 149,120 173,337 203,988
24 66.25 95.000% 114,496 149,122 173,772 204,971
25 66.50 96.667% 113,808 149,041 174,123 205,870
26 66.75 98.333% 113,037 148,878 174,392 206,686
27 67.00 100.000% 112,183 148,632 174,579 207,420
28 67.25 102.000% 111,613 148,790 175,256 208,754
29 67.50 104.000% 110,943 148,849 175,834 209,988
30 67.75 106.000% 110,173 148,809 176,312 211,124
31 68.00 108.000% 109,306 148,670 176,692 212,161
32 68.25 110.000% 108,340 148,433 176,974 213,100
33 68.50 112.000% 107,277 148,099 177,159 213,941
34 68.75 114.000% 106,116 147,668 177,247 214,686
35 69.00 116.000% 104,860 147,140 177,238 215,334
36 69.25 118.000% 103,508 146,517 177,134 215,887
37 69.50 120.000% 102,061 145,799 176,935 216,344
38 69.75 122.000% 100,519 144,986 176,641 216,707
39 70.00 124.000% 98,883 144,079 176,253 216,976
To run the figures for different assumptions, follow these steps: [3]
- Select All, Copy, and Paste [4] the following at cell A1 of a blank Excel sheet:
Code: Select all
Born 1960
NRA =MIN(67,66+MAX(0,B1-1954)/6)
PIA 1000
Rate 0.015
Die 78 82 85 89
Start Pct PIA -------- Present Value --------
62 =IF($A7<B$2,1-(5/900)*MIN(36,(B$2-$A7)*12)-(5/1200)*MAX(0,(B$2-$A7)*12-36),1+(8/1200)*($A7-B$2)*12) =-PV($B$4,C$5-$A7,$B$3*$B7*12,0,0)/(1+$B$4)^($A7-62)
62.25 =IF($A8<B$2,1-(5/900)*MIN(36,(B$2-$A8)*12)-(5/1200)*MAX(0,(B$2-$A8)*12-36),1+(8/1200)*($A8-B$2)*12) =-PV($B$4,C$5-$A8,$B$3*$B8*12,0,0)/(1+$B$4)^($A8-62)
=2*A8-A7 =IF($A9<B$2,1-(5/900)*MIN(36,(B$2-$A9)*12)-(5/1200)*MAX(0,(B$2-$A9)*12-36),1+(8/1200)*($A9-B$2)*12) =-PV($B$4,C$5-$A9,$B$3*$B9*12,0,0)/(1+$B$4)^($A9-62)
- Format for readability.
- Copy cells C7:C9 right to column F.
- Copy row 9 down to row 39.
- Revise assumptions as needed in cells B1, B3, B4, and C5:F5.
Edit 8/24/2019 4:40 PM to add fourth line representing benefits continuing only until age 78. (16 year expectancy for both of an age 62 male / female couple being alive.)
- The life expectancy for either one of a couple is computed to be 26.97 years in cell I8 in the "Either" column on the "Alive" sheet of my Longevity Estimator spreadsheet. The life expectancy of both is computed to be 16.08 years and is shown in cell H8 in the "Both" column.
- Example calculation when benefit claimed at age 64 and runs until age 82 using the Excel PV function:
146,042 = -PV(1.5%, 82 - 64, 80% * 12 * 1000, 0, 0) / 1.015 ^ (64 - 62)
- This spreadsheet is intended to illustrate how claiming age affects the present value of benefits. For actually choosing the claiming age that maximizes expected present value based on life expectancy, I recommend Mike Piper's (forum member ObliviousInvestor) Open Social Security calculator. (To correspond to my example, you need to check the [ ] Advanced Options box and revise the "Real Discount Rate" to 1.5%.)
- If you have trouble pasting, try "Paste Special" and "Text".