Another Social Security / retirement question

Factual Questions
41

You seem frustrated that your question wasn’t answered, but no one thought you’d be asking such a basic question. What you really asked was:

A 62 year old guy starts taking SS today at $20k per year. I’m going to make five times what he makes for 5 straight years ($100K vs. $20K) and then I’m going to make 50% more than he does ($30k vs $22k) for the rest of my life. Who will have more money?

No offense, but this isn’t really ‘bank of computers working night and day’ kind of calculation. As someone noted up thread, it’s pretty self-evident.

42

Here is one of many articles about retiring later to build retirement security. They are all over the place. From what I’ve seen, the coverage is split between articles on retirement age and articles on maximizing social security, with the latter sometimes having a mention that retiring later (and thus starting social security later) is good.
I already explained the factors in my decision about when to retire. They were disjoint from Social Security. But that isn’t the case for many if not most people.

43

Not at all. I get it now:

44

What I haven’t seen yet, on a quick read-through of the thread:

Let’s say you are going to retire at age 63, but put off taking your SS until you hit 65 or whatever.

In the intervening years, you have to rely on your 401(k) / IRA / whatever to make up the income you’d have been getting from SS.

That means you’re drawing down on your principal… thereby reducing how long that money would last.

I’ve read that to make your retirement money last long enough, it’s recommended that you take only about 4% of your money each year. So if you have a million dollars in an IRA, you’re taking 40,000 per year.

If, at age 65, you’d get 3,000 a month (36,000 a year) from Social Security, you’re going to be getting 76,000 a year. If you need that 72,000 a year starting at 63, you will be taking all 76,000 (152,000 total) from your IRA.

So (ignoring any growth in the IRA in the meantime), you now hit age 65 with 848,000 in your IRA. That 4% is 36,400 now (1,000,000 - 152,000 = 848,000, and 4% of that is 33,920 if I’ve done my math right). So your income is 69,920. To bring it up to 76,000 a year, you’d need to draw down a little more than 4 percent.

A more precise picture there would take into account assumed growth in the IRA (e.g. that 1 million IRA is going to be worth more than 848,000 after 2 years, even with taking 76K a year).

45

I’m curious about this statement.

Why would someone want more money at the beginning than at the end of their retirement?

Yes, someone newly retired might be healthy enough to do things like travelling. But as they age, their medical expenses are certain to increase, including costs like nursing homes - and while Social Security has some COLA built in, it doesn’t keep up with inflation - and virtually no other retirement vehicle has any COLA features at all.

46

Medical costs might increase, but it’s by no means certain that they will include nursing homes. In any event, we’re not talking about people who will just have enough to survive. For example, I will be retiring by 62 whether I start collecting SS at 62 or wait till 67 or 70. At 62, I will get about $24k a year from SS, at 67 it will be about $32k and at 70, it will be $43k. My husband’s benefit will be about the same. I will want a higher income for the years from 62 to 70 because those are the years I will be spending more money on travel etc. I don’t want to live on my pension until 70 and then have my income more than double when I won’t be able/inclined to enjoy the money the way I would have at 62. Just as one example , when I turn 62 in six years, I will have a grandchild about to turn 6 - it will be far more enjoyable to take a vacation with him or her at that time than waiting until I’m 70 and grandchild is 14.
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47

Not to mention the fact that you wouldn’t be eligible for Medicare during those few years.
mmm

48

Here is a related question. My wife and I are the same age. I plan to work until probably 70, since I have nothing better to do. So I will start receiving more than 100% of my retirement. My wife can claim social security on her own, but it is a much smaller amount. I would think she should start taking SS on her record, at say age 66, and then switch over to spousal payment when I start drawing SS. Or does the fact that she retired at an earlier age freeze her at that age even on my record?

49

She can file for the switch once you go on SS. SS will pay whichever is higher.

50

Her benefits can’t be more than half yours at full retirement age. So you working to 70 does not impact her benefits, assuming she takes it at FRA.
She will get a combination of benefits. So, if her benefit is less than half yours, she’ll get her full benefits plus enough spousal benefits to make 1/2 yours.
Cite.
Now, I’m waiting until 70 to collect mine, but when I hit FRA I started collecting spousal benefits from my wife. She is getting her regular benefit. When I hit 70 we’ll switch over so that I collect all mine and she collects half my FRA benefit which is more than her’s. But people born after 1954 or so (not sure of the exact age) can’t do this anymore.
And I was too young to do the old trick of requesting SS at FRA, having her get half, then suspending mine to grow until 70. Congress got rid of that when it became too popular.

If she takes spousal benefits before FRA they get reduced.

51

My wife and I are in the same situation as Voyager and doing the same thing. There used to be a crazy loophole where one spouse could file for his (or whoever had the largest S.S. Benefit) benefits and then immediately suspend them. His wife could then collect her spousal benefit (half her husband’s FRA benefit). Both spouses would then accrue their 8% per year increased benefit until they reached 70 years of age. My wife and I missed the cutoff for this loophole by six months.

We also dodged the IRMAA bullet. We sold some rental property in the year before I retired, increasing our reported income tremendously. People with a high income pay a surcharge (IRMAA) for Medicare of as much as $325 per month for both spouses ($7,800 per year). There are a limited number of exceptions, such as retiring from a high paying job. There is a special form you must submit to avoid the IRMAA surcharge. We had to file this form for the first two years.

52

Is that surcharge based on your income from before you retired??? or am I misunderstanding?

My brother was just “grandfathered” in under the clause where you can collect on your spouse’s benefits (in his case, his ex-wife’s). And he was born in 1953. I know my husband and I can’t do that when the time comes. But I’m curious now: how does it work if there are two spouses (one ex, one current)? She’s remarried - would the spousal benefit be split among the two husbands? Can the terms of the divorce agreement change this? (no clue what, if anything, their divorce settlement said).

A couple of general questions, ignoring the wait / don’t wait question:

Scenario 1: The spouses have similar income, and each earns a SS benefit of, say, 3K a month.

While both are alive, do they each get 3K a month? Or is there some formula that means they only get 4,500 a month (3K from one, and half that for the other)? And what happens when one dies? Does s/he get 3K a month, or 4500?

Scenario 2:
One spouse would get 3,000 and the other would get 1,000:
What do they collect monthly? 3,000? (higher of the two) 4,000? (sum of the two) 4,500? (higher one, plus half the higher one)?

If the 3,000-earning spouse dies, does the survivor get 1,500 (half of the 3,000)? or 1,000 (his/her own)? or 2,500 (half of 3,000 + the 1,000)?

53

The surcharge is based on your modified adjusted gross income from 2 years before - your MAGI from 2018 will be used to determine the IRMMA for 2020.

IRMMA applies to both Part B and Part D - for 2019, the highest Part A surcharge was $460.50 ( per person) on a MAGI of $500k individual/ $750k married filing jointly
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54

Whoever is living gets $3K per month - you either get your own benefit or the spousal benefit, whichever is higher. While both are alive , the total is $3K. When one dies, the survivor still gets $3K

They get $4500, the full $3K benefit for the higher earning spouse and the other gets the $1500 spousal benefit.

That depends on whether one or both were already collecting when the higher earner dies - and there’s a
survivor’s benefit that seems to be different from the spousal benefit and you can collect a survivor’s benefit and later switch to your own if it is higher. Way more complicated than the other scenarios.

55

Typo -
Whoever is living gets $3K per month - you either get your own benefit or the spousal benefit, whichever is higher. While both are alive , the total is** $6K. **When one dies, the survivor still gets $3K

56

Technically when you take a spousal benefit you get your benefit first and then the spousal benefit so you get to the full spousal benefit amount.
It only works (not counting the hack I’m happy to see I’m not alone doing) if one spouse is going to get more than twice the other spouse will. Which is our case.

SS figures out what pot to take the money from, you don’t have to.

There used to be an excellent site which let you play with all sorts of scenarios, but it vanished. There must be another around somewhere if someone wants to search for it.

57

Not at all, because my entire Social Security monthly benefit wouldn’t even be $3,000 if I waited until age 70 because I never made anywhere near $100,000/yr. when I was working.

As I said, my numbers based on my real-life benefits calculation, don’t match your hypothetical $100,000 calculation.

58

PHEW!!!

Otherwise, it’d be financially better to divorce right before we retire so we each get the 3K.