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  • Social Security

    So I just read through "Get What's Yours" by Kotlikoff et al about Social Security.  Complex stuff.

    Basic assumptions:  1) I've worked more than 10 years but will certainly have less than 35 years of qualified income.  2) No life changing events such as disability, death, marriage/divorce.  3) I'm not planning to need SS to live or eat, but it is money that I'm "entitled" to; and it is a good form of longevity insurance.  4) SS will still be around for high earners when I qualify in 25 years.

    Take-away/actionable steps:  1) Defer benefits til 70th birthday for best ROI; 2) Extra years of income will likely not add much to monthly income (the more you make, the less percentage of your dollars you get back)--i.e. delaying retirement has low reward in terms of SS; 3) Advisors at SS office may be well-intentioned, but may give bad advice; 4) If life events occur, re-evaluate everything.

    Anybody have anything to add to this list?  What am I missing?

  • #2
    Social Security is the most important guaranteed annuity available to all working Americans. We buy it, just like with any annuity, but it probably has the best ROI of any you can buy on the market.

    I typically recommend deferring to age 70, but you need to run a break-even analysis to know how many more years you need to live to get your money back. Not a joke. For example, a client who is a heavy smoker decided to file at 65 and I concurred. He just sold his half of a multi-million $ business so he will be fine with or without so it was all about guaranteed benefits, not an effect on retirement lifestyle.

    For every year you wait, you get a lifetime increase of 8%, which is a guarantee that is hard to beat.

    Locking in higher benefits also locks them in for your surviving spouse, so you are making that decision for 2, not 1.

    We subscribe to a nifty software analysis program for SS to give our clients an analysis to help us make a decision. There are also some nice free programs on the net, including at the SSA website.

    Finally, be sure to check your SS report each year to make sure your wages and benefits are being reported correctly (I wrote a post about this recently). Many people still don't realize that the SSA stopped sending annual reports years ago and you have to sign up for an account and request.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I too have read the Kotlikoff book.  Several things he was advocating for married couples to do are no longer legal.  The file and suspend strategies.  The decision seems to be the high earner if in good health should delay until 70.

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      • #4
        Yes, a lot changed last year; there is a second edition this year that takes all of that into account.  I found it pretty interesting to see how easily/arbitrarily the rules of the game can be changed!

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        • #5
          One thing to add that's not obvious to many:  There is no benefit from delaying past 70!  Of course, unless the laws change.  Some people are under the impression that the longer you defer, the bigger your benefit will be, period.  Not filing until you're 72 or 73 offers no added benefit and can cost you a lot of money.

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          • #6
            Johanna, I remember reading somwehere that you do not think SS will go away. But, it will run out (I think it already has technically)...what then?

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            • #7




              Johanna, I remember reading somwehere that you do not think SS will go away. But, it will run out (I think it already has technically)…what then?
              Click to expand...


              It won't run out. The rules will change. An example is this year's (2016) wage base jump of 7+% from $118,500 to $127,200. Another is when the IRS started taxing SS income. Let's see, what could they do...?

              • Raise the minimum age at which you can collect SS - actually logical since lifespans have increased so much;

              • Raise the wage base even more;

              • Reduce SS payments for people who have high retirement account balances (coordinate the payout on the total);

              • Raise SS tax rate;

              • And so on...


              Plenty of opportunities that I haven't listed here. If you are driving straight for the Grand Canyon at 60 miles per hour and you are 120 miles away, do you tell yourself you will go off the cliff in 2 hours or do you adjust course? That's where we are with SS.

              It is the most popular government benefit by far, affecting the most people by far, and with the largest consistent voting block by far. You tell me - will legislators allow SS to go away? Will they even allow us to think there is a possibility it might go away?
              Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                i think ss is here to stay Conniebird.  I agree with Johanna that especially high earners will pay more into the system and get less out.  I believe that I have read that if nothing is done benefits will be cut by 25% by some date (2027??).  Congress will probably act so this does not happen since the program has so much political support.

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                • #9
                  You could download the anypia program and put in 20 years or 25 or however many years you think you will work to get an estimate on what you will receive barring changes.

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                  • #10
                    Just adding to this old thread.  Harry Sit's blog today pointed me to https://socialsecurity.tools.  I would add this site to the list of AMAZING resources available for folks that like to plan.  Basically you can cut and paste your earnings record into the app and it lets you play around to see what your benefit will be based upon what you have done, what you plan to do, etc.  For me, it really highlights: 1) those bend points, 2) the changes as you work more to get rid of the "zero" and low income years, 3) the dollars involved with early/normal/delayed plan.

                    Really neat tool to play around with.

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                    • #11
                      Agree. This was very enlightening for me. Seems like about 10 years of preattending wages (range $1,000/yr-55,000/yr) combined with 16-17 years of max wages as an attending is sufficient to hit the second bend point.

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                      • #12
                        This has been always my question.....dual MD couple...my husband is the "higher earner", but when you pull both our reports for the last few years...we both have maxed the monthly payout and the only thing that changes is inflation year to year.....is it just an age thing then????  ie I should delay even though i'm the lower earner but should have a longer life expectancy......does the "higher earner" rule go away for married couples who have each maxed their benefit?????

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                        • #13
                          let's broaden this out just because I'm curious myself. Not a dual MD couple, but we're a dual-income couple where each person will have an earnings record of at least 35 years if we include odd high school and college jobs. I'll probably average out to $90k over that time, with ~5 years maxing it out while my spouse will max out for 25 years and the other 10 years probably average maybe $30k (ah, medical school and residency!). If I do her max times 25 years and then $30k for 10 years, her average comes to around $100k. I know these are very ballpark #s that could be off, and SS will change before I retire, but still, I actually think in our scenario we would each retire and not take SS until 70 years and it'll be based only on our own individual earnings record.

                          So I'm inclined to think bean1970 is right, the higher earner rule goes away for married couples who have each maxed their benefit, but I'm not informed on this at all

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                          • #14




                            For example, a client who is a heavy smoker decided to file at 65 and I concurred. He just sold his half of a multi-million $ business so he will be fine with or without so it was all about guaranteed benefits, not an effect on retirement lifestyle.
                            Click to expand...


                            Interesting how old threads revive. A couple of “like” votes led me back here and I have a sad update to the story. This client recently passed. His lifestyle choices that worked against him and his choice was part prescient, part gamble, but totally understandable. He made the right call.

                            On a side note, when a thread from 2016 revives itself, I click on it with great trepidation. In the last few years, I have learned so much about working with physicians, their practices, and the specific issues that are common to so many of you. Because I am not a doc and not married to a doc, I have always felt a little “behind”. Just reading the threads and the many helpful comments here regarding practice issues, locums situations, contracts, etc, along with talking to clients and prospective clients and reviewing their documents has increased my awareness and knowledge exponentially. I can only hope that I didn’t lead anybody astray with poor advice when I first became serious and active. (And pray for forgiveness and reconciliation if I did.)

                            Thinking about writing a post about then versus now and how far we’ve come (because I’ve dragged both firms along for the ride, of course :-) ) - and the embarrassment when I think back to 3 looooooong years ago and some of my faux pas’s.

                            You guys are great. Simply great.
                            Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                            • #15
                              I just want to get to the 2nd bend point. 17.5 years of max earnings.

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