Claiming Social Security at/around 70 questions

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notPatience
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Claiming Social Security at/around 70 questions

Post by notPatience »

I’ll turn 70 in early Dec. (but not the 1st of the month.)

I checked OpenSocialSecurity.com and it recommended filing to start receiving in Nov. (69 +11 months.) If I wait for full 70, I’d get about $4 less lifetime. So one question is an academic/just curious “Why?” would full 70 be less than 69+11?

Next question is, does lifetime benefit continue to decrease for each month after 69+11? OpenSocialSecurity doesn’t show calculations past 70 – just says you don’t want to wait past 70. But I’m wondering if it might be beneficial for me to wait past 70.

SITUATION

Single

Self-employed in IP creation and still working by choice. No telling on future income level, though not likely to stop completely any time soon.

Been doing Roth conversions in whatever space is left over from taxable income up to $111k IRMAA cliff.

If I take SS at 69-11, that two-month SS income takes up about $6.8k ($8k SS benefit x .85 taxable) of 2021 taxable income space that otherwise would be allotted to Roth conversion.

If I wait to 70, my 2021 SS benefit income for one month. So it would cost me $4.00 in lifetime SS benefits to be able to convert $3.4k.

Is there a way to know what it would cost in lifetime SS benefits to wait until Jan. 2022 (70+1) to claim? (which would mean having two months delayed so $6.8k room to convert in 2021.)

This seems worthwhile to me. Am I missing something? Is that additional conversion amount not worth the finagling? (Previous conversions/contributions make Investments: 52% Roth, 33% TIra, 15% Taxable.)

LOGISTICS QUESTIONS

What is the timing for claiming at 70 (or 69+11 or 70+1)?

I did a lot of Googling, but results only tell the benefits of waiting until 70. Got that covered. Need the next steps.

I know that at earlier ages, exact date/month of claiming can made a big difference. Are there similar issues/pitfalls around claiming at/around 70?

Did find useful info on “unequivocal statements” in Bogleheads wiki including example:
"I wish to receive my maximum benefit, including all delayed retirement credits to age 70. I do not wish to receive any retroactive payments based on a retirement age earlier than 70."
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FiveK
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Re: Claiming Social Security at/around 70 questions

Post by FiveK »

notPatience wrote: Wed Apr 21, 2021 2:15 pm If I wait for full 70, I’d get about $4 less lifetime. So one question is an academic/just curious “Why?” would full 70 be less than 69+11?
Perhaps because the extra monthly payment almost, but not quite, makes up for one fewer month's benefit.
Next question is, does lifetime benefit continue to decrease for each month after 69+11? OpenSocialSecurity doesn’t show calculations past 70 – just says you don’t want to wait past 70. But I’m wondering if it might be beneficial for me to wait past 70.
Unless your marginal tax rate will be >100%, delaying the start date past age 70 will not be beneficial.
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jeffyscott
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Re: Claiming Social Security at/around 70 questions

Post by jeffyscott »

I don't know about the rest of your questions, but the cost of delaying beyond 70 would cost you 1 month's benefit each month. There are no increases to the monthly benefit for delay beyond 70 and your benefits end with your life, so you collect the same monthly amount for one month less with each month of delay upon reaching 70.

So in your case, with $4000 per month from SS, it'll cost $4000 to wait to 70+1.
Carl53
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Re: Claiming Social Security at/around 70 questions

Post by Carl53 »

I believe that you filing for age 70 benefits to begin in December will start showing up in January and not impact your ability to do conversions this year. Had you been 70 a few months earlier, you could have delayed until January and then asked for up to 6 months of retroactive payments or back until your 70th birthday. The backlog of benefits would be delayed until next year.
JPM
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Re: Claiming Social Security at/around 70 questions

Post by JPM »

To the best of my recollection, If you file for age 70 eligibility in December, your first check will be received in January.
hicabob
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Re: Claiming Social Security at/around 70 questions

Post by hicabob »

notPatience wrote: Wed Apr 21, 2021 2:15 pm “Why?” would full 70 be less than 69+11?
Due to the mortality tables perhaps (for males anyway) ?
Topic Author
notPatience
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Re: Claiming Social Security at/around 70 questions

Post by notPatience »

you collect the same monthly amount for one month less with each month of delay upon reaching 70.
So, I could not get Dec. 2021 benefit retroactively in 2022?

Thanks @JPM and @Carl53 on filing for Dec. benefits would result in Jan. check.
Had you been 70 a few months earlier, you could have delayed until January and then asked for up to 6 months of retroactive payments or back until your 70th birthday. The backlog of benefits would be delayed until next year.


Could I not do that for 2 months? Ask in Jan for Dec. and Nov. retroactively?
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Flobes
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Re: Claiming Social Security at/around 70 questions

Post by Flobes »

notPatience wrote: Wed Apr 21, 2021 10:13 pm Could I not do that for 2 months? Ask in Jan for Dec. and Nov. retroactively?
Check out topic Pushing SS Income Into Next Year. Be sure to read OP's updates about the process and timing downthread.
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notPatience
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Re: Claiming Social Security at/around 70 questions

Post by notPatience »

Flobes wrote: Wed Apr 21, 2021 10:57 pm
notPatience wrote: Wed Apr 21, 2021 10:13 pm Could I not do that for 2 months? Ask in Jan for Dec. and Nov. retroactively?
Check out topic Pushing SS Income Into Next Year. Be sure to read OP's updates about the process and timing downthread.
Perfect! Thank you, @Flobes.
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jeffyscott
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Re: Claiming Social Security at/around 70 questions

Post by jeffyscott »

If you are converting to $111K each year, does it really matter in which year you get the SS income?

If you shift $6800 in taxable income from 2021 to 2022, then you can convert an additional $6800 in 2021 while staying under the $111K, but will this not mean converting $6800 less in 2022?
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BolderBoy
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Re: Claiming Social Security at/around 70 questions

Post by BolderBoy »

jeffyscott wrote: Wed Apr 21, 2021 2:44 pmI don't know about the rest of your questions, but the cost of delaying beyond 70 would cost you 1 month's benefit each month. There are no increases to the monthly benefit for delay beyond 70 and your benefits end with your life, so you collect the same monthly amount for one month less with each month of delay upon reaching 70.

So in your case, with $4000 per month from SS, it'll cost $4000 to wait to 70+1.
That might be a little misleading. The SSA will make up for missed months beyond age 70 by making a retroactive payment to cover those months. There is an upper limit to how far back they are willing to pay for missed months. It seems to be about 7-8 months max.

So OP wouldn't be losing the $4000; it would be paid retroactively.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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BolderBoy
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Re: Claiming Social Security at/around 70 questions

Post by BolderBoy »

notPatience wrote: Wed Apr 21, 2021 2:15 pmI checked OpenSocialSecurity.com and it recommended filing to start receiving in Nov. (69 +11 months.) If I wait for full 70, I’d get about $4 less lifetime. So one question is an academic/just curious “Why?” would full 70 be less than 69+11?
Could it be a mistake? My understanding is that the SS benefit is calculated month-to-month and though we casually say that waiting beyond FRA garnishes an extra 8%/yr in SS benefits, the SSA uses a monthly % to get the actual number. From your posting above, that would imply that the % doesn't apply to the month transition from 69yrs11months to 70yrs0months. I'm not so sure that is correct.

(NB: I am not an expert at this)
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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notPatience
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Re: Claiming Social Security at/around 70 questions

Post by notPatience »

jeffyscott wrote: Thu Apr 22, 2021 6:55 am If you are converting to $111K each year, does it really matter in which year you get the SS income?

If you shift $6800 in taxable income from 2021 to 2022, then you can convert an additional $6800 in 2021 while staying under the $111K, but will this not mean converting $6800 less in 2022?
It makes some difference in having that money earning in Roth a year earlier.

In my specific case it makes a difference because my income as I continue to work swings wildly. At this point, I have a good grasp on the first half of 2021, while all of 2022 is completely unknown. So, I try to max bird-in-hand converting opportunities as I can.
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notPatience
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Re: Claiming Social Security at/around 70 questions

Post by notPatience »

BolderBoy wrote: Thu Apr 22, 2021 11:31 am
notPatience wrote: Wed Apr 21, 2021 2:15 pmI checked OpenSocialSecurity.com and it recommended filing to start receiving in Nov. (69 +11 months.) If I wait for full 70, I’d get about $4 less lifetime. So one question is an academic/just curious “Why?” would full 70 be less than 69+11?
Could it be a mistake? My understanding is that the SS benefit is calculated month-to-month and though we casually say that waiting beyond FRA garnishes an extra 8%/yr in SS benefits, the SSA uses a monthly % to get the actual number. From your posting above, that would imply that the % doesn't apply to the month transition from 69yrs11months to 70yrs0months. I'm not so sure that is correct.

(NB: I am not an expert at this)
It's not the monthly benefit changing. It's $4 over the lifetime of benefits. I gather from Oblivious Investor that it's a result of present value -- getting some money a month early and calculating that value over the X years SS figures as "lifetime." That satisfied my "but why?" mind.

Sorry if my "but why?" led folks astray.
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BolderBoy
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Re: Claiming Social Security at/around 70 questions

Post by BolderBoy »

notPatience wrote: Thu Apr 22, 2021 12:01 pmIt's not the monthly benefit changing. It's $4 over the lifetime of benefits.
Oh. So it could be $4/20 years, for example?

A rounding error, then...
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jeffyscott
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Re: Claiming Social Security at/around 70 questions

Post by jeffyscott »

notPatience wrote: Thu Apr 22, 2021 11:56 am
jeffyscott wrote: Thu Apr 22, 2021 6:55 am If you are converting to $111K each year, does it really matter in which year you get the SS income?

If you shift $6800 in taxable income from 2021 to 2022, then you can convert an additional $6800 in 2021 while staying under the $111K, but will this not mean converting $6800 less in 2022?
It makes some difference in having that money earning in Roth a year earlier.

In my specific case it makes a difference because my income as I continue to work swings wildly. At this point, I have a good grasp on the first half of 2021, while all of 2022 is completely unknown. So, I try to max bird-in-hand converting opportunities as I can.
I don't know, maybe I am missing something but I still am not seeing much advantage. If your income is over $111K in 2022, then you would presumably convert up to $138K in 2022, so it's still just a matter of shifting $6800 of Roth conversions from 2022 to 2021.

The $6800 that was shifted may even be what pushes you into a higher IRMAA tier that you are trying to avoid. For example, given that your income is uncertain and apparently may even approach or exceed $111K without any Roth conversions, what if your income without the shift of the SS benefits is $107K in 2022, then the added $6800 means you are now going to be in the $111K-138K IRMAA tier and that would've been avoided had you taken the SS benefits this year.

The $6800 in Roth a year earlier amounts to very little. If it gains 10% in the TIRA in the meantime, that maybe means paying tax on an extra $680 someday. There could even be a loss of value during the one year delay, possibly saving you some small amount of future taxes.
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notPatience
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Re: Claiming Social Security at/around 70 questions

Post by notPatience »

jeffyscott wrote: Thu Apr 22, 2021 12:26 pm
notPatience wrote: Thu Apr 22, 2021 11:56 am
jeffyscott wrote: Thu Apr 22, 2021 6:55 am If you are converting to $111K each year, does it really matter in which year you get the SS income?

If you shift $6800 in taxable income from 2021 to 2022, then you can convert an additional $6800 in 2021 while staying under the $111K, but will this not mean converting $6800 less in 2022?
It makes some difference in having that money earning in Roth a year earlier.

In my specific case it makes a difference because my income as I continue to work swings wildly. At this point, I have a good grasp on the first half of 2021, while all of 2022 is completely unknown. So, I try to max bird-in-hand converting opportunities as I can.
I don't know, maybe I am missing something but I still am not seeing much advantage. If your income is over $111K in 2022, then you would presumably convert up to $138K in 2022, so it's still just a matter of shifting $6800 of Roth conversions from 2022 to 2021.

The $6800 that was shifted may even be what pushes you into a higher IRMAA tier that you are trying to avoid. For example, given that your income is uncertain and apparently may even approach or exceed $111K without any Roth conversions, what if your income without the shift of the SS benefits is $107K in 2022, then the added $6800 means you are now going to be in the $111K-138K IRMAA tier and that would've been avoided had you taken the SS benefits this year.

The $6800 in Roth a year earlier amounts to very little. If it gains 10% in the TIRA in the meantime, that maybe means paying tax on an extra $680 someday. There could even be a loss of value during the one year delay, possibly saving you some small amount of future taxes.
All those "ifs" and "could bes" and "maybes" you cited might go against me, as you posited. Or they might go the other direction and make this small adjustment beneficial.

For now, I have a view of how 2021 is shaping up, 2022 is completely in the land of "ifs" and "could bes." Having dealt with variable income for 30+ years, I do what I can when I can. And adjust when I see how the next year is shaping up.

Yup, 2022 income could push me above $111K or $138K. Depending on how close to a cliff, I could avoid it by lumping biz expenses or DFA contributions or contributing to Trad i401k or go the other direction and swing around to max conversions up to next tax bracket/IRMAA cliff. Finally, I could convert less in 2022, having already converted more in 2021 than my conversion-per year goal.

Or 2022 income could be lower, even with SS and the retroactive. In which case, I'd convert more that year.

It's not like it's any extra effort to delay SS a month or two. I have to apply to start benefits anyway. Just a question of doing it in Nov., Dec (early or late), or Jan and getting retroactive payments in 2022.
ralph124cf
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Re: Claiming Social Security at/around 70 questions

Post by ralph124cf »

In your particular situation, with 52% Roth and 33% tIRA, I would not be in a hurry to do more Roth conversions.

You did not mention if you have LTC insurance, but if you are self insuring, remember that LTC expenses are deductible as medical expenses subject to some limitations. If you have $100K in LTC expenses in a year, you could withdraw that amount from the tIRA, then turn around and take the medical expense as an itemized deduction. The deduction doesn't quite wipe out the taxes from the withdrawal, but it comes close.

Ralph
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calmaniac
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Re: Claiming Social Security at/around 70 questions

Post by calmaniac »

This would be a great question to submit to The Retirement and IRA Show podcast! The host, a CFP instructor at Colorado State, answers Social security minutiae questions at the start of every show.

BTW, OP, you have spent time that is probably worth ≥100x whatever the $ difference in your choices amount to. I get it, it's sport at this point. :D
But just keeping it real.
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Re: Claiming Social Security at/around 70 questions

Post by 3feetpete »

notPatience wrote: Wed Apr 21, 2021 2:15 pm I’ll turn 70 in early Dec. (but not the 1st of the month.)

I checked OpenSocialSecurity.com and it recommended filing to start receiving in Nov. (69 +11 months.) If I wait for full 70, I’d get about $4 less lifetime. So one question is an academic/just curious “Why?” would full 70 be less than 69+11?


The above depends on how long you live. If you live one month longer than the OpenSocialSecurity.com assumed then obviously the $4 less calculation no longer would apply. I think what you want to do would be to apply in November or December for SS to begin in January.
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Re: Claiming Social Security at/around 70 questions

Post by 3feetpete »

The $4 calculation depends on how long you live. If you live one month longer than the OpenSocialSecurity.com assumed then obviously the $4 less calculation no longer would apply. I think what you want to do would be to apply in November or December for SS to begin in January.
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JoeRetire
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Re: Claiming Social Security at/around 70 questions

Post by JoeRetire »

3feetpete wrote: Thu Apr 22, 2021 5:39 pm The $4 calculation depends on how long you live. If you live one month longer than the OpenSocialSecurity.com assumed then obviously the $4 less calculation no longer would apply. I think what you want to do would be to apply in November or December for SS to begin in January.
Unless you select the "Assumed age at death" mortality table, then OpenSocialSecurity doesn't assume a specific date of death. It uses a mortality table to calculate the probability of being alive at every given age.

see: https://opensocialsecurity.com/about#mortality
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