Depends - the least expensive ACA plan that comes close* to my current coverage would cost me $22K a year for me and my husband and the most expensive would be $45K. The COBRA rate for my current insurance is $24K - if the COBRA rate was just a little lower, it would be less expensive than all the ACA plans.
Fundamentally, if you don’t qualify for subsidies ACA plans are very expensive. If you do qualify they can be incredibly cheap. Due to a change in life circumstances I now qualify and discovered I can get an adequate plan for $2 a month, and a good plan for $300.
I didn’t exactly qualify for a subsidy. If I did the ACA plan would be a lot cheaper. But the quality, including deductible, was so different that there was no comparison. I expected the ACA plan (Covered California) to be a lot better than I found it.
ETA: I was also happy with my work coverage, and so being able to basically keep it was a plus. If money had been tight I might have gambled on not needing a lot of healthcare before Medicare cut in.
IANA expert on ACA. I do know that the subsidy arrangements were significantly changed by the COVID support/recovery legislation passed shortly after the election.
AIUI, the phaseout has been made a lot more gentle. Plus some other customer-friendly changes. And they re-opened “open renrollment” to enable people to take advantage of these changes even though their 2021 plan decisions had already been made in late 2020 under the prior legislation.
The point here being that somebody who evaluated ACA plans for the 2019, 2020, or even 2021 plan year might benefit from a fresh look under the new rules.
Could they actually have used that money if they had received it between 65-75? That is, were they holding back on some expensive activities they wanted to do, specifically because they had financial concerns (that SS disbursements during those years would have alleviated)?
A question related, but never addressed, to all this (suggesting perhaps that it’s a stupid question?): WHY are the SS benefits mandatory at age 70 1/2?
I ask because I don’t really need my SS benefits to kick in at 70 1/2. The extra $$ will be nice to have, but I won’t need it particularly, and would look upon my nest egg growing by 8% per annum until such time as perhaps I DO need it.
Seems to me this would work out for the government as well, as a certain number of retirees who would opt like me to keep delaying their SS benefits at 8% per annum would simply drop dead before collecting a nickel, so it’s not as if our collecting say 60,000 starting at age 85 (or whatever) instead of collecting $30,000 at age 70 1/2 is lost revenue for the government. Seems to me the two (extra benefits paid out to 85+s, money saved by those who die between 71 and 85) would even out, or could be made to even out. So why does the government insist that the 8% bump stop at age 70 1/2?
Ultimately the answer is that’s just the way the law and the regulations read. Altering the laws about SS are politically very fraught. And as well with so many sets of competing “facts” out there, there’s lots of room for citizens to become outraged at their legislators over what’s actually beneficial to them, if only they had the real facts, not the fake facts.
Here’s another factor:
The punchline being that SS was never designed to offer a high and safe ROI by waiting. The real ROI was supposed to be zero; where you were actuarially expected to receive the same amount of inflation corrected time-valued dollars whether you claimed at 62, 64, 66, or 70. The concept was that both the claimant and the government would be indifferent to the choice.
But then inflation and interest rates changed and the rules didn’t. So now waiting is a pretty darn good investment and a one-way bet for anyone who’s in decent health and not broke nearing age 62. Much to the government’s chagrin. Encouraging more waiting at the current high ROI is almost certainly a money loser for the government.
As between keeping the status quo or allowing more waiting past 70 while also trimming (read as “gutting”) the ROI, I’ll stick with status quo thankyouverymuch.
Minor aside: I’m not sure where you got “70-1/2” from. AIUI the SSA limit is starting to claim in the calendar year you turn 70. Which means anywhere between just barely 70 on 12/31 or almost 71 having turned 70 back on 01/01.
“70-1/2” used to be the latest date to commence RMDs from IRAs. Is that what you were thinking of?
Can someone explain this to me:
I collect my “full benefits” at age 66y8m.
But yet, if I opt out at that point, my benefit continues to increase (until 70, I think).
So WTH does the terminology “full benefit” even mean? Is it just poorly worded, or am I (again) missing something?
mmm
As I said earlier, about six months before I turned 70 I got a letter recommending that I start taking benefits — but it did not mention any legal requirement. So I believe there is indeed some confusion between SS benefits and RMD withdrawals (and Og knows the gummint has spared no effort to provide opportunity for confusion).
Off top of head, I’m not 100% sure there is any requirement to ever sign up to receive SS benefits. What happens for sure on your 70th birthday is the amount stops increasing other than for the annual COLA every recipient gets annually on Jan 1st.
Note also that a COLA “Cost of Living Adjustment” is not a COLI “Cost of Living Increase”. Some folks’ some years have been mightily miffed to discover the difference. IIRC there was one year recently where the Medicare premiums went up more than the upward SS COLA for a lot of folks getting average or lower SS benefits. So their “take-home” benefit actually went down from year to year. Surprise!
It would be better to call it your “unreduced” benefit or something like that. Calling it the “full benefit” doesn’t make sense, although it may have in the past.
But even calling it “unreduced” seems wrong, as it is reduced from my age 70 (max) benefit (which would seem correct to be called my “full” benefit).
I know this sounds nit-picky, I just want it to make sense.
mmm
Try this.
For you, mmm, “normal” = 66y8M. So far so clear?
The gotcha is that in the legislation that introduced the sliding scale of ages by birth year to receive the normal benefits instead of the original age 65 for all, they used the word “full” instead of “normal”.
In fact the official term for your e.g. 66y8m is your “Full Retirement Age” or FRA.
There’s also an implication that for most workers, they will be gainfully employed right up to that date then cease all gainful employment. And so be “fully retired” is the sense of “completely retired”.
Bottom line: “full” doesn’t always mean “maximum”. There are a lot of other dictionary definitions of “full”. One of those others applies here.
And again remember that the original idea was NOT that’d you’d get more money by waiting to 70. You’d get the same amount of money (correcting for inflation and net present value), just distributed differently.
Yep. I graduated college 40 years ago, and turn 62 this year. and my income now is higher than ever, but not THAT much higher than, say, 5 years ago. I believe SSA also includes some inflation adjustments in the calculations - e.g.50,000 a year 20 years ago is worth more in the equation than 50,000 a year right now. I’m sure my income this year will replace my income from my early earning years even with that factored in - I’m earning roughly 6x what I did when I graduated, and there have been a couple years where I took some unpaid leave.
My in-laws made the decision to retire 20 years ago and begin collection Social Security early - MIL was 62 and FIL was 65. While their income was never terribly high (and I think MIL collects based on FIL’s earnings). an extra year or two would have paid for itself by now. But they were (and are) both quite obese, FIL has numerous health problems, and it’s a miracle he’s still alive. MIL made a pretty good attempt at dying early, also. In their situation, nobody would have guessed they’d live long enough that delaying the payout would have worked for them.
Both my parents died at age 75 - so that’s my mental stopping point. Admittedly, it’s unlikely I’d go from the same cause as either of them, never having smoked (mom had lung cancer) and being unequipped with a prostate… but I have my own health issues. My grandparents died at ages ranging from mid 60s to nearly 90 - averaging on the lower end of that. Again, I am not at risk of either of the truly early death causes (not alcoholic, no ALS). Still, I’m trying to plan for the longest term.
For fun, I looked at my own SSA account just now. Using their estimates - which are based on my current earnings rate - my payout at age 70 is 1.78 times my payout at age 62, and it is 1.25 times the amount at my full retirement age. I did some basic arithmetic - simply added up the monthly benefit I’d get with each approach - and the full-retirement-age total doesn’t exceed the “retire at 62” total until I’m 78 years old. The retire-at-70 total beats the retire-at-62 even later - 79 years and 11 months. It beats the retire-at-full-retirement-age figure when I turn 82. Taken by itself, that’s a pretty clear argument for retiring and taking Social Security as early as possible.
BUT, that does not account for other costs. If I want to (and am able to) work until I’m 70, that’s likely the financial winner - I’m earning, which will bump up my benefit a bit more with every year I work, and I am presumably continuing to save in my 401(k) etc. So I might be adding another 100K or more to my nest egg, versus what I have saved right now - and I won’t be dipping into that nest egg either. I’ll have more equity in the house, i.e. less retirement housing expenses. Healthcare costs between retiring at 62, and being Medicare-eligible at 65, could take a huge chunk of that monthly income.
On the other hand, I’m sick of working and if I hold out until I turn 70, I have less time to enjoy my own savings. Yes, I’d leave more behind (and with two special needs kids, that’s a real concern).
So: the TL/DR version of that is that the book’s premise is plausible from an arithmetic standpoint, but does not touch on nearly enough of the factors you’d need to look at.
+
Yes to inflation corrections.
Each of your earnings in each year from your birth to now are corrected by an inflation factor based upon CPI to convert them to this-year dollars. Then the biggest 35 of those numbers are selected and averaged. That’s the baseline income your benefit is then computed from.
I am male. Both my grandmothers lived into their 90s. Both my grandfathers died in their forties. My maternal grandfather died of renal carcinoma. My paternal grandfather died of suicide. My father died at 62 of a heart attack probably brought about by untreated obstructive sleep apnea (which I also have, but use a CPAP. My mom is still kickin’ it into her late 70s.
Not sure my grandparents are a useful data set. It seems to me that both my grandfathers died due to outside influences.
Fascinating: I found the formula, and it involves an Average Wage Index figure (AWI) which is based on the first year you are eligible for SS. Actually, 2 years BEFORE you are first eligible. For someone turning 62 in 2021, that is the figure for 2019 (very year after that is taken unmultiplied).
Then you divide that by the AWI for a particular year, to get a ratio. For 2019 it’s 54,099.99 and for 2018 it’s 52,145.80 - so 100,000 bucks earned in 2018 would be treated as if you’d earned 103,747.55. For 2000, the ratio is about 1.68 - so 100,000 earned then would be treated like 168,000.
Going back through my own earnings history, my most profitable year was 2003 - nearly 20 years ago. 2019 is pretty darned far down the list at # 26.
It’s rather sobering to see that, in effect, my earning power has DECREASED over the years despite periodic salary increases.
Assuming I earn the same amount of money for each of the next 5 years as I earned in 2020 (thus replacing 5 “lower” years) that only bumps up my average earnings by about two thousand dollars.
Being a geek (and avoiding work), I tried duplicating the calculation per Motley Fool - and found that extra 5 years of working - i.e to my full retirement age - only nets me an additional 25 bucks or so. I’m sure it’s not quite correct, as I get a lower benefit either way than my SSA statement suggests - but not by that much - so the idea of working a bit longer to try to increase one’s SS benefit by increasing the average earnings is NOT worth it.
Yeah. Unless your current year wages are among your highest inflation corrected wages there’s very little leverage to affect your full benefit. Maybe none if your high-earning years are already behind you.
But that last sentence doesn’t quite follow. Working longer to increase your base benefit is low to nil leverage as you say.
Working a bit longer so you can receive wages and still be able to eat while delaying claiming SS is pretty high leverage: ~8% per year.
For many people, stopping working any date after age 62 forces them to immediately claim SS the very next month or they won’t eat or make rent. For those folks, continuing working to 65, 66+, or all the way to 70 has a major impact on their monthly payout. But mostly from the ROI/NPV benefit of delaying, not from their base benefit growing as a result of the extra years of paid work that are probably just replacing earlier years of paid work at a similar inflation-corrected annual wage.
True - I was NOT counting that part of it - comparing apples to apples etc. Yes, every year I continue working is basically 8% more (or, not-8-percent-less which isn’t quite the same thing, but good enough for rough comparisons). Plus, during those extra years, you’re (hopefully) putting aside more in a 401(k) or similar.
I need to do some similar crunching for my husband, who is almost the same age - and earns (now) almost exactly what I do, but for many years earned less, between grad school, and sticking with an underpaying job that gave great flexibility for family life. For him, I would bet that additional years would have a bigger effect on his high-35 average.
I’m not sure he even has 35 years yet. Anyone know if, in that case, the denominator is still 35 when calculating the average? If he does hit 35 years right now, at least some of it will be minimum-wage-type jobs from his teens!
Answering my own question: yeah, the years with no income will be counted as zero - i.e. the denominator is still 35.
Am I understanding correctly that it is the highest paid 35 years of your working life that are taken into the equation, and not the most recent 35 years?
mmm