Dec 10, 2016

Online Tools For Deciding When To Claim Benefits

     Social Security's Office of Research, Statistics and Policy Analysis has produced A Comparison of Free Online Tools for Individuals Deciding When to Claim Social Security Benefits. The study compares the free online tools provided by the Social Security Administration itself, the Consumer Finance Protection Bureau, the Center for Retirement Research at Boston College, the American Association of Retired Persons, Financial Engines and Bankrate. The bottom line is that each has its advantages and disadvantages.


Anonymous said...

The retirement tools on are pretty good, not hard to work with, a bit time consuming to enter the data but if you want an accurate picture you need the info. Going to try some of the others, always used the SSA in the past.

Anonymous said...

Some of the calculators (such as SSA's) just estimate benefits at different ages. The effect of age is easy (for a single person) once the level of benefits at NRA is determined, but this depends on assumptions, especially the Average Wage Index (AWI) for the year the person turns 60. I think SSA's basic calculators assume AWI will increase at the inflation rate in the future, which is a conservative assumption, since AWI normally increases faster.

With an estimate of benefits at NRA, benefits at any other age can be calculated, and, with an estimate of life expectancy, total benefits can be calculated. For me, the total is highest if I take Social Security at about 68.5 years (using my life expectancy at 62). However, this doesn't account for the fact that claiming at an earlier age gives you benefits earlier, which requires a discount rate (how fast money grows with time). Taking this into account makes the maximum total benefits occur at an earlier age (64.5-68 for a discount rate of 2.6%; it's fairly flat in that range).

I think the bottom line is that, for a single person who lives to average life expectancy, it doesn't matter much. People who expect to die earlier than average, or who need the money, should claim earlier. In the opposite case, they should claim later.