Social Security Inside Out

Managing your TSP and alternate investment options after retirement or separation from service.

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Relevant
Posts: 505
Joined: Thu Apr 26, 2012 1:01 pm

Social Security Inside Out

Post by Relevant »

For many of us, Social Security will form the cornerstone of our income when we retire, yet most of us know nothing about the choices we face or even realize we will have choices.

Social Security is arguably the most complex and least understood program in the country, second only to the Federal Tax Code.

Fortunately, retired Social Security District Manager, Robert Bruce, offers an easy to understand Social Security Workbook on his web site at: http://www.SocialSecurityInsideOut.com

In 38 pages he takes the mystery out of the benefit choices we face and guides us through examples in order to make sound decisions.

Working couples in particular need to consider their social security benefit options before purchasing any type of retirement annuity.

For example, Mr. Bruce describes a hypothetical couple where each spouse is 66 years old and each eligible to receive “Full Retirement Benefits” of $1,200 per month based on their individual earnings record. Their combined benefit of $2,400 per month will drop to $1,200 per month when either spouse passes.

But they have another option. Spouse “A” can apply for the “Full Benefit” of $1,200 per month now while Spouse “B” defers their “Full Benefit” and applies for “Spousal” benefits of $600 per month now. Their combined benefit will be $1,800 per month for the next 4 years.

When Spouse “B” turns 70 he or she will then apply for his or her “Full Benefit” receiving a “Delayed Retirement Credit” boosting their benefit to $1,584 per month. The couples combined benefit now totals $2,784. If Spouse “B” passes first, Spouse “A”’s benefit will increase from $1,200 per month to $1,584 per month under the “Widow/Widower” benefit. The couple will be money ahead when they reach age 76. In this scenario the spouse most likely to pass first should choose to take the spousal benefit now and defer their full benefit until age 70.

The age difference between each spouse as well as different earned benefit levels all play into the various options you may want to consider, but Mr. Bruce’s workbook covers all that and more.

For instance:

Did you know that your benefit is based on your average salary over the past 35 years?

Did you know that social security indexes each year’s earnings to today’s value before coming up with your average salary for benefit calculation? So, the $7,800 annual salary you earned in 1969 is considered to be $55,153 today.

Did you know there is a bonus for military service and work in foreign countries?

Did you know that Social Security has about 250 million W-2’s not credited to any taxpayer? Mr. Bruce’s workbook will tell you how to make sure you get credit for all of your earnings.

I rarely endorse a product on this site but feel Mr. Bruce’s workbook is too important not too. http://www.SocialSecurityInsideOut.com

AARP has a social security calculator you may find useful as well.

[url]www.aarp.org/work/social-security/social-security-benefits-calculator/[url]

http://www.RelevantInvestments.com

crondanet5
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Joined: Tue Aug 19, 2008 8:51 pm

Re: Social Security Inside Out

Post by crondanet5 »

The federal employees in the Social Security office are wonderful to discuss your personal SS account with. Unfortunately they don't know much about the TSP Program. If you go there you might try to steer them to this site.

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rcozby
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Re: Social Security Inside Out

Post by rcozby »

I've already bought two books on social security and have scoured the websites, but can't find a clear answer to my seemingly simple question:

If I retire (i.e. no further wages from any source) at my MRA and collect the special retirement supplement until it runs out at age 62, is there really an advantage to waiting until later (i.e. 67 or even 70) to file for social security benefits?

Although the knee-jerk answer appears to be yes, you get 8% for every year you wait, when I run the calculator, if I don't work during the years that I wait, then those are "zero" years and they don't really make a difference in the payout, other than perhaps the COLAs.

Seems smarter to collect at 62 unless you plan to earn wages and pay into the system until you decide to collect. Does that make sense? Thanks!

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evilanne
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Re: Social Security Inside Out

Post by evilanne »

It really depends on how long you actually live. Technically, if you draw SS at 62 you are "penalized" by a reduced amount for the rest of your life (and for your spouse). If you look at it as an opportunity cost/time value of money, you can calculate breakeven for how many years you would have to live to earn back the amount of money you would receive by taking it sooner rather than later. Another way is to look at what would you be able to earn on the money if you invested the reduced amount for a certain time period, could you earn the equivalent or more than the penalty incurred by waiting. There are many factors that could impact what actually happens, such as whether taxes or inflation increases/decreases and your life expectancy. If you die before you draw any benefits (without any dependents), it makes the SSA a little more solvent for the rest of us. If the SSA goes bankrupt you might end up with nothing, which is unlikely, but it is possible that it could be reduced or they could change the rules. If you have a family history of living until you 90-100, it may be beneficial to wait if you can afford to do so. I think everyone's situation is different. I think it is important to also consider the impact to any dependents, if applicable.

crondanet5
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Re: Social Security Inside Out

Post by crondanet5 »

I recommend applying for SS Benefit as soon as you are eligible. The way Social Security office explained it to a friend I accompanied, there is a pot of money-- your pot of money-- you get withdrawals from. Yes, taking it early means you get less per month but you get more monthly payments over the long run. Yes later starts mean bigger checks but for how long? How many SS checks did Robin Williams receive? And as I review the obituaries in my local paper, I see more and more younger deaths happening. If you wait until age 70 to start your Benefit and you die at age 71 how many checks would you receive? See what I mean? This is similar to planning withdrawals from your TSP Account. Say you die at age 71 and you left your money in the TSP. How, when and what is the process for your designated beneficiary to receive some or all of your TSP Account balance? Scary.

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evilanne
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Re: Social Security Inside Out

Post by evilanne »

crondanet5 wrote:Say you die at age 71 and you left your money in the TSP. How, when and what is the process for your designated beneficiary to receive some or all of your TSP Account balance? Scary.
If beneficiary is spouse, they can keep it in TSP or roll it over to their own IRA(s). For non-spouse beneficiaries, it can be rolled over into inherited IRA(s) and set up for RMDs based on their age at that time. It is not really scary, they just need to be aware of it to avoid large tax impact. Same rules apply to IRAs, 401k & TSP accounts

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dougellen1
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Re: Social Security Inside Out

Post by dougellen1 »

Take the Social Security money at age 62. Spend NONE of it. Invest wisely. If you earn more than 4% per annually you come out AHEAD of anybody waiting until any future age. Eventually you start spending the money. Caveat: If you continue to earn income after 62, you should not take the money.....Only when you've stopped earning income.

seawatcher
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Joined: Sat Feb 03, 2018 10:49 pm

Re: Social Security Inside Out

Post by seawatcher »

Relevant wrote: But they have another option. Spouse “A” can apply for the “Full Benefit” of $1,200 per month now while Spouse “B” defers their “Full Benefit” and applies for “Spousal” benefits of $600 per month now. Their combined benefit will be $1,800 per month for the next 4 years..
This changed in 2015 -- read more. https://www.investopedia.com/ask/answer ... my-own.asp
Good luck with your TSP and retirement plans!

ProduceMan
Posts: 506
Joined: Thu Jan 18, 2018 12:01 pm

Re: Social Security Inside Out

Post by ProduceMan »

Relevant wrote:For many of us, Social Security will form the cornerstone of our income when we retire, yet most of us know nothing about the choices we face or even realize we will have choices.

Social Security is arguably the most complex and least understood program in the country, second only to the Federal Tax Code.

Fortunately, retired Social Security District Manager, Robert Bruce, offers an easy to understand Social Security Workbook on his web site at: http://www.SocialSecurityInsideOut.com

In 38 pages he takes the mystery out of the benefit choices we face and guides us through examples in order to make sound decisions.

For instance:

Did you know that your benefit is based on your average salary over the past 35 years?
I thought Social Security was calculated using your highest 35 years, not past or last. Someone correct me if I’m wrong :)
Moneys’ Money Making Money (4M)

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evilanne
Posts: 1886
Joined: Thu May 14, 2015 6:52 pm

Re: Social Security Inside Out

Post by evilanne »

ProduceMan, you are correct. In many cases last 35 will be highest 35, but not always.

ProduceMan
Posts: 506
Joined: Thu Jan 18, 2018 12:01 pm

Re: Social Security Inside Out

Post by ProduceMan »

evilanne wrote:ProduceMan, you are correct. In many cases last 35 will be highest 35, but not always.
Thanks Evilanne
Moneys’ Money Making Money (4M)

Scarfinger
Posts: 615
Joined: Mon Jan 30, 2012 12:00 am

Re: Social Security Inside Out

Post by Scarfinger »

crondanet5 wrote: Thu Aug 11, 2016 7:34 pm I recommend applying for SS Benefit as soon as you are eligible. The way Social Security office explained it to a friend I accompanied, there is a pot of money-- your pot of money-- you get withdrawals from. Yes, taking it early means you get less per month but you get more monthly payments over the long run. Yes later starts mean bigger checks but for how long? How many SS checks did Robin Williams receive? And as I review the obituaries in my local paper, I see more and more younger deaths happening. If you wait until age 70 to start your Benefit and you die at age 71 how many checks would you receive? See what I mean? This is similar to planning withdrawals from your TSP Account. Say you die at age 71 and you left your money in the TSP. How, when and what is the process for your designated beneficiary to receive some or all of your TSP Account balance? Scary.
you need to figure out your break even point. You need to know the amounts at your Min age for for SS, full SS age and at age 70. That combined with you expected age at death.

I used a death date of 86. I used an online calculator and past history of family ages at death to come up with this age.

If I delay receiving benefits until age 70, it takes 10 years, or until age 79, to break even with benefits begun at age 62, but it takes 13 years, or until age 82, to break even with benefits begun at age 67. Benefits begun at age 67, take 11 years, or until age 77 to break even with benefits begun at age 62.

So it would benefit me to take SS at age 67 to 70 expecting to live into my 80's. But honestly right now I don't plan on working until 70 and I am not sure I will be able to live on my Pension and TSP alone until age 70.

But it does point me into the direction of waiting as long as I can... if I can afford to. But other wise at age 53 now, I really like the sound of retiring at age 65. But that's another 12 years away so things may change.

Best of Luck
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