There are other scenarios that are not discussed in the article. For example, my wife passed away several years ago at the age of 66. She was receiving Social Security Disability and upon her 66th birthday (her Full Retirement Age) her benefits became Social Security Retirement. My wife's benefits were above-average because she had a number of years of good earnings. I, on the other hand, am still working as a private practice attorney. Between 62 and 66 (Full Retirement Age) I would be subjected to an earnings test if I filed for early retirement. The earnings threshold is extremely low and did not interest me. Furthermore, people who own their own business or practice are heavily scrutinized because we can control the amounts we are paid At Full Retirement Age the earnings test goes away. I waited until the year I turned 66 to file for Widower's Benefits against my deceased wife's benefits. The result is that I can collect my wife's benefits while my benefits continues to increase. At the age of 70 I will be forced to take my benefits but at the maximum.
I plan to delay receiving benefits until age 70, and nothing in the article changes that. However, as Motley Fool should know, the fact that you get a bigger check by waiting does not mean that you should do so, because you also get a check for fewer years. Motley Fool must know a way to calculate the total value of Social Security benefits obtained by claiming benefits at different ages, and they would find that there is little difference. If the trust fund runs out and benefits are cut (mentioned in the article but unlikely in my opinion), then the value would almost certainly be significantly higher for those claiming earlier.
As the article mentions, life expectancy makes a big difference in when you should claim (as does necessity, of course). However, another factor is Medicare premiums. People with Medicare Part B premiums taken from their Social Security checks are protected from increases in Medicare B beyond their COLA, so that is a reason to claim early. Another factor is taxes, and it seems to me that this generally favors claiming later. This is because Social Security benefits are partially taxable, with the amount that is taxable depending on your taxable income plus half your Social Security. This can result in a much higher marginal tax rate while receiving Social Security. For example, if your taxable income plus half of Social Security is above $25,000 a year, then the amount of Social Security that is taxable is 50% of the amount by which this exceeds $25,000 (up to a threshold). So for every dollar above $25,000, you pay taxes on that dollar plus $0.50 more of your Social Security benefits, or $1.50 total. At $34,000, the rate goes from 50% to 85%, and the thresholds are not indexed to inflation. This can be a big factor, which can be complicated, so it would have been helpful if the article discussed it.
Another factor is that folks who delay receiving Social Security retirement benefits, who live off savings instead (IRAs etc), are using up the "capital" of the savings -- and will not recoup it. By waiting until age 70 to draw Social Security, they may end up with a somewhat higher monthly check until they pass-- but Social Security cannot be willed to anyone. Survivors' Social Security benefits are set by law. So the person's estate to be left to children or other heirs will be less.
There are other scenarios that are not discussed in the article. For example, my wife passed away several years ago at the age of 66. She was receiving Social Security Disability and upon her 66th birthday (her Full Retirement Age) her benefits became Social Security Retirement. My wife's benefits were above-average because she had a number of years of good earnings. I, on the other hand, am still working as a private practice attorney. Between 62 and 66 (Full Retirement Age) I would be subjected to an earnings test if I filed for early retirement. The earnings threshold is extremely low and did not interest me. Furthermore, people who own their own business or practice are heavily scrutinized because we can control the amounts we are paid At Full Retirement Age the earnings test goes away. I waited until the year I turned 66 to file for Widower's Benefits against my deceased wife's benefits. The result is that I can collect my wife's benefits while my benefits continues to increase. At the age of 70 I will be forced to take my benefits but at the maximum.
ReplyDeleteI plan to delay receiving benefits until age 70, and nothing in the article changes that. However, as Motley Fool should know, the fact that you get a bigger check by waiting does not mean that you should do so, because you also get a check for fewer years. Motley Fool must know a way to calculate the total value of Social Security benefits obtained by claiming benefits at different ages, and they would find that there is little difference. If the trust fund runs out and benefits are cut (mentioned in the article but unlikely in my opinion), then the value would almost certainly be significantly higher for those claiming earlier.
ReplyDeleteAs the article mentions, life expectancy makes a big difference in when you should claim (as does necessity, of course). However, another factor is Medicare premiums. People with Medicare Part B premiums taken from their Social Security checks are protected from increases in Medicare B beyond their COLA, so that is a reason to claim early. Another factor is taxes, and it seems to me that this generally favors claiming later. This is because Social Security benefits are partially taxable, with the amount that is taxable depending on your taxable income plus half your Social Security. This can result in a much higher marginal tax rate while receiving Social Security. For example, if your taxable income plus half of Social Security is above $25,000 a year, then the amount of Social Security that is taxable is 50% of the amount by which this exceeds $25,000 (up to a threshold). So for every dollar above $25,000, you pay taxes on that dollar plus $0.50 more of your Social Security benefits, or $1.50 total. At $34,000, the rate goes from 50% to 85%, and the thresholds are not indexed to inflation. This can be a big factor, which can be complicated, so it would have been helpful if the article discussed it.
Another factor is that folks who delay receiving Social Security retirement benefits, who live off savings instead (IRAs etc), are using up the "capital" of the savings -- and will not recoup it.
ReplyDeleteBy waiting until age 70 to draw Social Security, they may end up with a somewhat higher monthly check until they pass-- but Social Security cannot be willed to anyone. Survivors' Social Security benefits are set by law.
So the person's estate to be left to children or other heirs will be less.
Filing at 62, only one male member of my family has ever received RIB, he got three checks before he died.
ReplyDelete