3 Key Social Security Claiming Strategies

[@rob_berger]

Here's the link to my interview with Mike Piper: kzbin.info/www/bejne/d4KmYWCsn5uba9k

[@janethunt4037]

This was incredibly helpful and came out while we were deciding. His tool is simple but awesome. Thank you for connecting your viewers to Mike.

[@brianmurphy-j4h]

I've set up my retirement to pay as little taxes as possible, thanks to Glen Howard Chester, a NY-based fiduciary. At 58, my wife and I plan to retire at 62 with a diversified portfolio: $620k brokerage account (withdrawing up to $94k at 0% tax), $140k IRA (tax-deferred, using standard deduction), $325k Roth IRA (tax-free), $100k cash, and 15oz physical gold. With Social Security, a $25k pension, and our investments, we'll draw from multiple sources. Glen's expertise helped me optimize our tax strategy, utilizing the $29,200 standard deduction against IRA pre-tax money, aiming for minimal taxes. His guidance proved that a better plan is more important than accumulating more money, and I'm grateful for his education on efficient retirement planning.

[@abundowealth]

Hi everyone! Our team wrote the article Rob is referencing in this video. As always, he does an excellent job summarizing the key takeaways in a very simple manner. Of course, everyone's situation is different, and Social Security is not short on nuance. For the many folks in the comments committed to taking SS early, just make sure you consider the alternative that Mike Piper raised in his excellent discussion with Rob on this channel. Specifically, if you have bonds in your portfolio at all, you can usually get a better overall outcome by spending down the bonds as a bridge to a higher SS payment. Everyone values increased spending power in early retirement vs. long-term expected value and longevity protection differently, though, so it's another one of those choices where there's only a right choice for your goals. We hope the content was helpful for some simple guidelines!

[@Charlie-sl4gg]

I always enjoy the information, but too often we look at the "When do I collect?" question from the perspective of death. I choose to approach it from the living perspective. Retiring and collecting at 65 will allow me 5 additional to live life with my wife while I can enjoy it. My SS break even between 65 and 70 is age 81. By 81, my "guy's golf trips," long-haul vacations, etc will be slowing/over. When I pass, my wife still has available assets to continue her life, and she'll have (hopefully) 5 additional years of our memories together. We all have different priorities, I guess.

[@tlan77]

We (married couple) never used math and life expectancy tables for this decision. Regardless of how soon we might die and therefore might collect very little, our priority was simply to ensure we always had enough. So, we waited until a couple of months before 70. We’ve never regretted it, and the cost of living adjustment (COLAS) on the much larger amounts were an unexpected bonus. Nobody ever paid us more if our cost of living went up; we were small business people.

[@lonwoock9881]

A lot of people miss the 'security' part of Social Security. By delaying, you created that security and will also reap lower taxes in the future.

[@littlered4122]

My Wife and I are doing the exact same thing. We are 55 now, Plan to Retire at 60. Do a REV-RMD Plan from 60 - 70, then take MAX SS at 70. Our other Back-Up is a ROTH IRA that we hope to never touch, but its nice having it there and no RMD's to worry about. Thank You for helping us feel better that others are doing the same. Vanguard, Fidelity and our personal advisor all say "Bad Idea" to drain down Traditional IRA from 60 to 70. Well, we are doing it anyway. Most important, NO DEBT.

[@randolphh8005]

The biggest problem with this approach, is those that don’t consider dual life expectancy and the fact that almost all couples spend several years as a widow/widower. More important, if you retire well before FRA. So depending on a couple’s individual earnings records, ages, and life expectancy, there may be an advantage in using a somewhat split strategy. The higher earner usually delays, but the other spouse MIGHT be better of taking a little earlier IF ages and life expectancy, and individual earnings records line up. In our case we both had good earnings records when we retired at 63. so one taking earlier (at 63) made sense. Our combined SS will be $7200 in today’s $, with one large survivor check from me waiting till 70. In the meantime the extra SS for several years has limited portfolio withdrawals.

[@tlan77]

@@littlered4122 Very smart, especially NO DEBT (isn’t validation a wonderful thing!). You also have the option of modifying your plans any time during your 60’s if circumstances or priorities change. We paid off the house by our 50th birthday and haven’t been in debt since. We joke that we must have channeled our grandparents’ depression-era attitudes somehow . Congrats on the Roth IRA; we just helped our 21 year old granddaughter establish hers.

[@ItsEverythingElse]

COLA have nothing to do with the amount. % is %.

[@rickgrimsley4059]

Thank you Rob! Your the perfect teacher of retirement subjects. Your channel has been very helpful to me. I hope your enjoying the work and look forward to future videos.

[@cato451]

65 & 4 months is my magic age. Confirms my own modeling I did a dozen years ago. My monthly benefit is going to pay for all of my expenses.

[@tlan77]

@@cato451 What about future unexpected spikes in inflation? It’s unlikely future US governments will start living/spending within its means. Hopefully your monthly benefit includes enough extra bucks over your current expenses to help “future-proof” your living standard.

[@cato451]

@@tlan77 SS increases each year by the reported CPI rate. Expenses that spike generally are discretionary anyway. I can eliminate or substitute those. Any mandatory expenses that spike like say electricity or GAS will just have to be prioritized. That said, yes I will have plenty of other funds to handle any circumstance.

[@RodHardin]

Thanks very much. We took the higher earner at age 70 (recently) and the lower earner at full retirement age. But we also have had to factor in Roth conversions and Medicare IRMAA payments. So all of this has been an annual moving target considering these tables do not line up with each other and move every year.

[@hartzogLovesScience]

Tell me about it. Reading the Retirement Planning Guidebook felt like doing yoga when trying to match Medicare IRMMA and income planning.

[@RodHardin]

@@hartzogLovesScience The three areas we focus on for tax and medicare planning are the federal income tax tables, Net Investment Income Tax, and the Medicare IRMAA tables. The tax tables are the easiest because you only pay the higher percentage for the next level. The Medicare IRMAA is a cliff so if you miss it by $1 you go into the higher premiums for the whole next year. It also looks 2 years back on your tax return so if you want to be more precise you have to factor in inflation numbers. And of course the net investment income kicks in for AGI's greater than 250K. That is another 3.8% tax on income over those numbers. So try and be at the upper end of the 22% federal tax bracket which should keep you in the 2nd tier (mostly likely) for IRMAA and pay no investment income tax (if applicable). You can stretch into the 24% bracket but check your numbers carefully. That is what we do. Someone double check my thoughts! Luckily our state is flat rate so we don't have to factor that in.

[@elinsd]

⁠It’s been hard work every year trying to manage all those things you’ve mentioned. 😮

[@stevenbrady440]

Rob’s newsletter is fabulous. I signed up I think around two months ago. Now it’s one of my favorite things that I look forward to on Sunday mornings. You should sign up everyone. Keep up the good work, Rob. - A fellow Attorney from Florida.

[@ystebadvonschlegel3295]

I’m taking it the second I’m able to - I have ZERO faith that the government will not institute “means testing” and say I saved too much and can’t collect.

[@jpHarkins-kb2vv]

Ambulance chaser.

[@ericj9011]

The current SS structure and projections, as I understand them, will start providing less than 100% of the promised amounts by about 2032. That might encourage drawing SS earlier, although it's hard to predict what will happen and at what age they might grandfather you in.

[@miatafunrun3078]

You really need to run the claiming ages in some retirement package that takes into account taxes etc. I use Pralana and compared 67 to 62. If I used a fixed real rate of 3.7% for stocks, I don't get ahead until age 85. If I retire in 1966 (i.e. use historical returns from then), I get ahead at 79. If I retire in 1980 then I never get ahead because I had more money in the markets working during that boom time. My Mum and Uncle passed at 82 and my Dad at 47. I will take SS at 62.

[@CalmerThanYouAre1]

SS will be most valuable to us as insurance to shield our true assets (equities and real estate) from draw down and taxes. When we take it will be driven more by tax policy and Roth conversion strategy at the time we retire than anything to do with longevity. Health insurance subsidies could come into play as well if we both decide to fully retire before 65.

[@Jean_Pecourt]

On top of longevity insurance aspect, I view social security late claiming (70, possibly for both spouses) as a high inflation insurance. Just to partially avoid a situation like in the 1970s. It may not be optimal in terms of actuarial lifetime benefits optimization, but I think I can tolerate the insurance premium, just like I'm willing to accept lower returns than equities by investing a portion of our portfolio in TIPS earning only 2% real returns until maturity.

[@Yellowbeard79]

Hey love your content. Please consider looking or evaluating the value of buying Bond funds now @ 10+ year lows. (Sept 2024) before an expected rate cut campaign. Especially for people still saving for retirement

[@tab_nebraska235]

Rob, thanks for all you teach us!!

[@DavidDLee]

It seems incorrect to calculate this divorced from the fact that you are going to fund your retirement by taking money out of your savings while you wait to claim SS. When you do that, there's an opportunity cost of not getting the appreciation in value of your withdrawn amount from your savings. Basically, you need to compare your total income and gains for the scenario where you get a smaller SS early AND have more investment gains to a larger and later SS income AND a lower investment gains. This is actually not that difficult to do, it just requires some spreadsheet work. NewRetirement does not do that either.

[@nikij.6058]

Totally agree and what I was thinking. You can take early and either invest or use the money or take later and use your own money and miss out on the gains. This likely evens out in the end. Add in life expectancy and funding issues, makes me lean toward earlier. At least enough to cover my basic living expenses.

[@onlywenilaugh6589]

Plan for it to meet your monthly income, not for break even or total lifetime benefits. The last two won't matter if can't pay your monthly bills.

[@nikij.6058]

SS will never meet my monthly income. 😐 if it did I would go with that approach. For me I’m thinking early and invest. Both parents didn’t live long lives…

[@LayneBailey]

Thank you for this informative video. Do you have any similar videos to also taken into account pensions and how they affect Social Security withdrawals and taxes?

[@janethunt4037]

Great interview!

[@tadeuszurbaniak710]

Thank you for this information!!!!

[@Patrick-iq1do]

I have a government pension and Social Security. I'll take both as early as possible, and invest them. I have annuities providing 120% of my highest annual salary already. I also lump sum invested a large inheritance; again didn't need the money anytime soon. I'd rather rely on the S&P 500, and private insurance companies than the government. I've seen how the government works first-hand. :P

[@robertweisberg5570]

The government will pay out. That is a certainty for those who decide based on politics. Thats the noise. In the upside down world we live in, I hear 20 somethings even comment on Reddit that they think its possible for Treasuries to collapse when the government cant pay them. Thats the world of 2024 and maybe beyond.

[@Bullseye120]

Hi Rob, Great video as always, Thank You! The one problem that I have with these tools is that they mostly assume a scenario where you are going to spend the SS benefit that you receive. What about folks who want to take their benefit as soon as possible and invest it in some hi-yield investment (hi-yield assuming something more than 8% per annum). In that case over a 5 year time frame you would increase your dividend payment to half of your initial benefit assuming an 8% return (or higher) compounded monthly, and with all dividends reinvested. Yes, you will have to pay taxes on the earnings, but if you pass away, the working capital balance of the investment will still be intact. Is there anything that I am missing here, afterall fast nickels are better than slow dimes" especially given the unknown of the possible mortality scenario?

[@turbocfn39]

Well said. Makes a great argument for taking it at 62, not to mention there is a good chance we will die before the break even age of taking it later.

[@Harry_16710]

Agree 100%. Not to mention, it doesn't matter if you get more money if you're too old to use/enjoy it.

[@robertweisberg5570]

I think people are looking at the current bull market and feel they can get big aggressive returns. What is going to be over 8% and safe per the capital invested?

[@sammencia7945]

Claim at 67 and work to 68. Save that extra $25k that year. Stop then. Or invest to 66 or 67, live off savings to 70, collect max check at 70. Many ways to do this including downshifting to partime office work to stop wear and tear on body.

[@onlywenilaugh6589]

Working too long for me. Life is short, don't work too long. Living longer is on thing but quality isn't there starting early 80s. Energy goes way down.

[@andys5641]

Great information Rob. I'm 60, single, with approximately a million net worth. I thought about retiring at 62, but now it looks like I should wait till I'm 70 as I anticipate a longer life expectancy. The challenge is I'm really bored with my job and would like to change but then I would surrender a significant amount of my PTO if I went elsewhere. I do have a lifestyle career in mind, but I'm concerned about unpredictable income. Any insight to give?

[@Techie_Mum]

Hi Rob. In November I will retire at 55 due to health issues. Since my income stops, how will I know how much my benefit will be at 62, 65, etc? The Social Security estimates assume continued future income. Thank you.

[@USMCAllTheWay]

If you go on the SS site, you can elect to put in $0 for future earnings. I just did it last week. Take your time of the site. I believe there is a drop down menu near the graph. You'll see it. 👍

[@Jean_Pecourt]

When using Open Social Security tool, do you change the discount rate to account that you'd delay claiming social security by taking distributions from a 75%/25% stock/bond portfolio which historically may return more than the 20-yr TIPS yield?

[@JBoy340a]

Since my wife and I are 10 months apart in age, and earn/earned the same income, would the wait until 70 for both of us be the correct choice?

[@TrishaRico]

I wish someone would model a younger spouse that has the larger income. I'm 57 and my spouse is 61. Younger spouse is retiring this year and older spouse is waiting until 64. Older spouse will take SS at 65 and younger spouse at 70. When I run the numbers for openss it says to both take SS at 65. I am wondering if there are any suggested strategies for our situation??? Thanks

[@jayhinytzke3269]

Rob, I understand your relationship with New Retirement, but I'm curious if you have ever looked at, or evaluated The Retirement Budget Calculator by Jason Parker. If you have what are your thoughts?

[@auricgoldfinger8478]

If you don’t need your social security, and plan on investing it, there is no scenario where you should wait until 70. I claimed at 68 and 6 months. Investing the proceeds at even at a modest 4% return outperforms the 70 claiming age until over 100. Higher returns put the 70 claimant further behind. Calculating social security on absolute dollars only makes sense if you spend all proceeds and need it for expenses.

[@rob_berger]

What if one is taxed on 85% of their benefits? Does that change your analysis?

[@ericj9011]

The PV calculation seems legit and the most meaningful way to do the calculation. I guess what you're saying is if you can get an almost guaranteed post-tax return that beats the increase from delaying SS, then you should do that. Then we need to know the expected real return we get from delaying SS, to have something to compare to.

[@ericj9011]

The website/calculator Rob mentioned can do this calculation for you. You have to check the "Certain Situations" checkbox and then enter a higher discount rate than the default (which uses the 20-year TIPS rate). If you put in something high, like 10% (meaning you think you can return 10% after inflation and taxes) then it will, indeed, tell you to start taking SS as soon as you become eligible. Then you can play around and figure out the approximate breakeven rate to draw SS earlier. Would be nice if it would calculate that for you.

[@auricgoldfinger8478]

@@rob_bergerNo change at all because of the extremely low threshold for SS taxation- 44K. Get a compound interest calculator and do the numbers on your prospective benefits- you may have to visit your SS office to get the monthly projections. You will come to the same conclusion.

[@auricgoldfinger8478]

@@ericj9011Try 3% to start with. Conclusion is the same, but gets more in favor of taking SS before 70 as returns increase. At 5% I’m 105 before claiming at 70 makes sense

[@andrewroth9175]

The unknowns. Take SS early and hope there’s a bull market 10% to 12% per year from age 62 thru 70, you’ll look like a genius. If you delay during a lost decade (no return on investment) and use your cash to delay SS, you’ll also look like a genius. I say the safe play is delaying if you don’t need the money, especially if you’re married and in lower tax brackets. Spend down the pretax IRA.

[@Username_CC_]

Glad its all very straightforward lol

[@claymask7650]

I'm two years older than my spouse, and the lower earner. If I claim my own benefits, they will be nothing, or nearly nothing, so claiming my own benefits shouldn't really be considered. In this case, should he claim at 68, so that I can claim spousal benefits at 70? If he claimed at 70, the way I understand it I wouldn't be able to claim anything until 72.

[@Kelly_HornsUp]

Thanks Rob, Great information.

[@Letizia4813]

I'm really curious how this social security insolvency thing is going to work out and how that might factor into when to take SS. Should you take as early possible to get on the roles so they may cut you less? Are they going to look at people's net worth and determine whether you need the additional income or not? What about all of us that were told to plan on SS income as part of our "3 legged plan" for retirement, what if they cut our SS, can we class action sue the government? Somehow I think they are going to figure out how to continue to give full benefits to lower income people and short change higher income earners or people with higher net worth.

[@Patrick-iq1do]

I don't know how else they are going to deal with the massive national debt we are racking up.

[@JBoy340a]

This is the 3rd or 4th time that SS faces insolvency. Each other time the fixed the system to continue to full fund benefits. I have no doubt they will do this again. Because any party that does not support fixing it, will face the ire of a lot of older voters that will complain loudly and vote accordingly.

[@Letizia4813]

@@JBoy340a Yes I get that but has there ever been a time in this country when there was more focus on propping up the less financially responsible at the expense of those who have worked hard all their lives and acted responsibly? I am 56 so maybe this has always been the case but I can't remember when in my lifetime. I agree that this is the ultimate 3rd rail issue but if it ever was going to happen IMO now is the time.

[@Patrick-iq1do]

@@JBoy340a The money has to come from somewhere. I'm sure they will call it something patriotic, but either taxes go up or entitlements get cut (or both).

[@duc1198s]

Yep, this is exactly my fear. One way or another, they will figure out how to shortchange those of us who acted responsibly. And the worst of it is that we are not asking for a handout, it's sort of our money. Don't get me started with the $$$ we hand out to those who never contributed to the system at all...

[@pware9643]

Step right up n place yer bets.. a couple both age 65 have a 50% chance one of them will live to 90 and about a 20% chance one will live to 95. When u file you can get up to 6 months retro benefits in a lump sum.. so you could file at 70.5 and get a check for 6 mos benefits and IF it puts you into the next calendar year, then you have delayed paying taxes on it and maybe used the current year to fill up more of your tax bracket with Roth conversions.

[@onlywenilaugh6589]

The percent to live to 90 is not near that high. Last I checked, male at 65 was around 16% and female about 20. Not very high. Not sure stats for gender neutral:)

[@pware9643]

@@onlywenilaugh6589 the odds of one of them to survive to 90 increases dramatically than just looking at a single male or a single female longevity.. strange but thats how the longevity stats work...

[@spookietowne7932]

If you file for SS at 70.5 you are giving away 6 months of SS pay because you cannot gain more from SS after 70. And taking the 6 month lump sum reduces your benefit to the equivalent of what your 69.5 age benefit is. That will be your forever benefit moving forward (not including COLA's).

[@IRI-2050]

What if your wife was a homemaker and no social security?

[@JBoy340a]

How does having fluctuating W2 income into your 70s impact this decision? This is our case and I assume yours.

[@Jack51971]

Ya cannot retire at 62 if you have no savings or other pensions! 😮 Maybe 67 or 70. End of story!🤔

[@clownpocket]

The SSA has done all the math for us based on life expectancy and payouts, which is why I considered taking it early at 62.