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# Social Security benefits

According to Social Security I qualify for \$2788 in 2 years when I retire. If I choose to delay taking my benefit until I am 70 do I qualify for the 8% per year increment or \$3680.00 per year.
Assuming you meant \$3,680 per month (not year), the answer is Yes. The 8% annual increment does not compound, but is instead applied to the full retirement amount. 132% of \$2,788 is \$3,680. These calculations, by the way, exclude any bumps for inflation.
System101 - By "in 2 years when I retire", do you imply that in 2 years you will be at your full retirement age (66 years plus a few months depending on your birth-year), AND stop working, AND file for SS at the same year? Sorry it is unclear whether you will reach your full retirement age by then. On average, male American workers retire (stop working) at age 62 - much before their respective full retirement age. The bump (delayed filing) or reduction (earlier filing) is based on the eligible amount at Full Retirement Age. So a 60-year old "retiring in 2 years and getting \$2788/month" will get a much higher bump if delayed until age 70, because the \$2788 represents about 75% of the full-retirement payment.
Everybody focuses on the increased SS payments if deferred. Don't forget to compute the OPPORTUNITY COST (forgone income) associated with a (assumed) 4 year delay: (2788 × 12 x 4) = \$133,824. At age 70, your monthly payment will have increased \$892/mo or \$10,704/yr......so it will take you about 12.5 years to "recover" the forgone income ----- out at about age 83.

Bottom line: SS monthly payment increases SEEM somehow bigger when one does the 8% thing.....but SS is designed to provide the same total dollar payouts to everyone -- by an age out near life expectancy -- REGARDLESS of their choice of benefit claim age.
"SS is designed to provide the same total dollar payouts to everyone -- by an age out near life expectancy -- REGARDLESS of their choice of benefit claim age" is a key point that's often overlooked or not fully internalized. The only major exception to this simple observation is the spouse benefit aspect, because the individual's payout design doesn't account for the spouse's life-expectancy.

I see a few people citing "possible reduction in SS" as a reason for early claim. Personally I'm not too convinced about that being a good reason. If it does happen, I'm sure the reduction will apply evenly based on life-expectancy, and will neither penalize nor make it advantageous to people who filed early (i.e., the excess amount paid would be recovered).

I also see people filing early because they think they can earn higher return on the money than the increased payout. Although this may involved taking a bit more risk in seeking higher return, this could work at least in theory.

Some people have an uneven need of cash in retirement. They anticipate spending more in the initial years of retirement than the later phase. Early SS can help with the higher cash-flow requirement.

A few people think they wouldn't live very long (based on family history, personal health situation, etc.). I personally wouldn't bet on that. My family history and overall health situation doesn't point to a very long life, but I prefer not to speculate my lifespan or factor it in the SS decision.
(11-22-2018, 02:51 AM)Ybserp Wrote:  "SS is designed to provide the same total dollar payouts to everyone -- by an age out near life expectancy -- REGARDLESS of their choice of benefit claim age" is a key point that's often overlooked or not fully internalized. The only major exception to this simple observation is the spouse benefit aspect, because the individual's payout design doesn't account for the spouse's life-expectancy.

I see a few people citing "possible reduction in SS" as a reason for early claim. Personally I'm not too convinced about that being a good reason. If it does happen, I'm sure the reduction will apply evenly based on life-expectancy, and will neither penalize nor make it advantageous to people who filed early (i.e., the excess amount paid would be recovered).

I also see people filing early because they think they can earn higher return on the money than the increased payout. Although this may involved taking a bit more risk in seeking higher return, this could work at least in theory.

Some people have an uneven need of cash in retirement. They anticipate spending more in the initial years of retirement than the later phase. Early SS can help with the higher cash-flow requirement.

A few people think they wouldn't live very long (based on family history, personal health situation, etc.). I personally wouldn't bet on that. My family history and overall health situation doesn't point to a very long life, but I prefer not to speculate my lifespan or factor it in the SS decision.

A somewhat interesting "aside" comment for a married couple.  The dollars you receive do not really depend on who dies first.

Assume Spouse A collects more than Spouse B.

Case A.  Spouse B dies first and their (lower) benefits stop. Spouse A's (higher) benefits continue until Spouse A dies.

Case B, Spouse A dies first. Spouse B collects collects a survivor benefit equal to Spouse A's (higher) entitlement until Spouse B dies (and stops receiving their own lower entitlement)..

In either case, the lower amount stops when the first spouse dies and the higher amount continues until the second spouse dies.
I think it is a misapplication of "opportunity cost" when applying to SS.  I believe the principal is applicable to present funds, in the pocket; vs funds that are not yet realized.  Besides, the opportunity is a potential state with various outcome potentials.

I seen this chart today and it shows opportunity that is gained or lost by a simple timing of SS.

Okay, Al......let's just assume my point was poorly made and discard the term "opportunity cost" that you object to. Let's just say it this way using the chart you posted: Faced with the decision "start at 62 or start a 63," there are TWO dimension to consider.  1) Claiming at 63 boosts my benefit by \$50 or 7.1% forever. 2) BUT there is a cost associated with a take at 63 decision: \$8400 I could have received in year one of eligibility (\$700×12) must be forgone.

So the decision is actually between two payment streams: \$700 monthly for life OR \$750 monthly for life minus \$8400.  So it will take the beneficiary 14 years of higher payments to offset the \$8400 forgone in the decision to claim a higher benefit at 63.  Live past 77 and the "63" decision is a winner!

Substitute "forgone income" (or whatever) for "opportunity cost" as you wish.  My only point is that a claiming decision based on a simple "wait and get more" approach may be a poor one because it ignores income forgone by not claiming earlier.
You may be right.  The dynamics of all the personal situations are massively complicated.  It is impossible to say one size-fits-all.  I do not need the funds at this point, I like the growth of monthly payout via delaying, we have longevity in our genes, my wife is a part of the equation, etc.

The only big consideration that would justify my early claim to SS funds is that I am currently spending my own money that can be turned over to my heirs (whereas SS is done when I am done).  I do weigh that aspect from time-time, but my kids are successful and can stand on their own merit.  Also, I prefer not to nickel and dime the Social program that means so much to the less fortunate.

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