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Social Security optimization and spousal benefit timing  

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Peter Knupfer
(@docfiddle)
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Posted by: @morlock103

The general advise for most married couples is to have the lower earning spouse to claim as early as possible while the higher earning spouse defers benefits until reaching age 70. This strategy maximizes benefits for the surviving spouse while providing some income to couple until the high earning spouse reaches age 70. Of course this assumes married couples are of similar age.

The calculator asks about "file and suspend," although that specific strategy (not its components separately) is no longer available for all but a tiny sliver of filers. However, filing a restricted application is available and I don't see how the calculator handles it. My lower-earning spouse filed for full benefits at age 70, and at the same time, I, at age 67, filed a restricted application on her benefits, enabling us both to obtain SS income streams. I'll file for full benefits at 70. I don't see where in the calculator I'd model this, so I treated my benefit as a short term annuity income stream elsewhere in the calculator.


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Stuart Matthews
(@smatthews51)
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Peter, PRC handles restricted applications automatically and behind the scenes. If you're eligible, it assumes you're doing it and it should be reflected in the Social Security-related columns in the tabular projections.


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Ken Brantferger
(@brantferger608)
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@hines202 Thanks for the link to Open Social Security: Free, Open-Source Social Security Calculator. I've played with it a little and I'm pleased that it confirms my own spreadsheet calculations. The striking thing about trying to optimize your benefit age is that the optimal surface is so flat you rarely see more than a few percent difference between the optimal strategy and another strategies.


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Bill Hines, Retirement Planner
(@hines202)
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@brantferger608 You're correct - often folks spend a lot of time trying to 'optimize' but I've read many times that the actuaries work hard to set things up that no matter what age you start receiving benefits, you end up with the same total amount. Some of the good tricks like file and suspend are gone for almost everyone, and others may go away as SS is reformed.

Bill Hines
Financial Counselor/Retirement Planner
Money Coach Group, Inc
https://moneycoachgroup.com
bill@moneycoachgroup.com


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Greg Golich
(@golich428)
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I have also found that optimizing when to take social security can be tricky due to all the interactions with other decisions and assumptions. For example, the ROR assumptions can result in different optimal ages. I run different scenarios to better understand how other decisions and assumptions (withdrawal order, roth conversions, ROR's, etc.) impact each other. PRC does a great job providing the tables and graphs to better understand these interactions. In addition to looking at the savings at the end of the plan I also like to look at the savings through time using the compare fixed rate analysis graph and tabular projections. Sometimes there is not much of a difference at the end of the plan but significantly larger differences early in the plan that may be important in making your decision.

One other comment. If your goal is to maximize guaranteed income later in the plan, then taking social security as late as possible may be the choice some would make recognizing that the trade-off is possibly less savings at the end of the plan.

@Bill, I have used that same open source software but I am not sure how useful it is in making decisions compared to using Pralana that takes all other interactions into account. How do you use the output?


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Bill Hines, Retirement Planner
(@hines202)
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@golich428 I just use the Open Social Security calculator as a check, and also because I've had clients that are collecting SSI or SSDI, or their kids/spouses are. The Open SS calculator has inputs for that.

It also brings to light some things, like the restricted application, that PRC handles more covertly (as Stuart mentions earlier in this thread). I recently had a client that has a birthday very late in 1953, lucky him, he made the cutoff for the restricted application by mere weeks, and can collect his spousal benefit until 70, and then switch to his own benefit, which will have grown over that time.

Open SS also has a tool to let you play with alternate scenarios specific to Social Security. It's specific to SS of course, so nowhere as comprehensive or sophisticated as PRC!

Bill Hines
Financial Counselor/Retirement Planner
Money Coach Group, Inc
https://moneycoachgroup.com
bill@moneycoachgroup.com


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