Why One of Us is Taking Social Security Now

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As an early retiree in my 50s, I tried to factor Social Security into my financial planning. But with more than a decade to go before claiming benefits, the huge social program remained a mythical proposition. The government was going to deposit money in my checking account every month because of “credits” I earned during my working years? With frequent headlines about the Social Security trust fund running out of money in the 2030s, the program seemed all the more ephemeral.

But this spring, in our early-mid 60s now, Social Security became very real. When I downloaded my latest statement from the Social Security Administration (SSA) and punched the numbers into a Social Security calculator, suddenly there was a case for my wife Caroline to begin taking her benefits.

So in this post I’ll offer some background on Social Security, discuss resources for analyzing your claiming decision, and then explain why we chose as we did. Whether you like it or not, whether you ignore it or factor it into your retirement, Social Security is a reality of traditional retirement in the U.S. And for many, it is still a significant component of their retirement income.

Social Security Past and Future

Social Security is the social insurance program created in 1935 and intended to pay retired workers in the U.S. age 65 or older a guaranteed income after retirement.

Contrary to common belief, Social Security is not like a savings or investment account accruing in your name. Rather, it’s an income transfer program from younger workers to older. Back when the program was created, most people lived only a handful of years after they stopped working. And there was a large labor force of younger workers to support them.

Fast forward to modern times with life expectancies in the 80s and a shrinking workforce and it isn’t hard to see that a program designed for an earlier era might have difficulty making ends meet. In late 2022, the Congressional Budget Office predicted that the trust fund behind Social Security will run out by 2033. Without enough funds to pay existing commitments, a 23% reduction in benefits could be triggered unless Congress acts.

The solutions to the problem are straightforward — reduce benefits or increase payroll taxes — but politically painful. It’s anybody’s guess if and when our politicians will tackle the problem.

I suspect that a reduction in benefits is less likely than a raise in payroll taxes, because the older population has more political clout than the younger. And I think the most likely solution is some sort of financial chicanery that involves more unfinanced government spending and consequently increased inflation. So we might receive benefits with less spending power. But nobody knows for certain.

Our Social Security

Pundits will say that Social Security was never intended to be a retiree’s only income. And yet many Americans depend on it that way.

In my retirement planning, I took a middle path. I did not expect Social Security to fully support us, not even close. And I made sure that we had enough assets to muddle through even if Social Security never materialized — a scenario I consider unlikely. But I did incorporate a portion of Social Security, usually 50-75%, into my models as a required component for a comfortable retired lifestyle and some longevity insurance. As is the case for many modern retirees, Social Security will be our only inflation-adjusted income stream guaranteed to last as long as we do. Inflation-adjusted annuities are expensive and hard to find in the private market.

To get a handle on your potential Social Security benefits, it’s essential to create a “my Social Security” account at the Social Security Administration website. I did so many years ago and have a note in my calendar to download my Social Security Statement annually. That document has key data like your earnings record and your projected benefits at different ages.

I won’t go further into how to compute your benefits here, but there is more in Chris’s article from last year on how retiring early impacts Social Security benefits.

This year the data in our Social Security statements was critical. We used it and several other factors to evaluate our Social Security claiming decision:

  • our earnings record and our projected benefits
  • how long we think we’ll both live
  • how much we trust the government to deliver benefits into the future
  • our ability to live off other savings and what we think the return will be

Social Security Made Simple

But before making a decision on Social Security, I wanted to brush up on how the program works.

Mike Piper’s Social Security Made Simple has long been my go-to reference for all matters related to Social Security. Piper is a CPA and long-time personal finance blogger, so I trust him as an authoritative source on Social Security.  He has a knack for boiling complex subjects down to their essentials and explaining them in as few words as possible. In only about 100 pages, he clearly answers any question I’ve ever had on the matter. And he’s kept the book up to date with recent changes in the law.

Piper includes handy tables showing the reductions or increases in retirement and spousal benefits depending on your claiming age. These demonstrate the essence of why to consider delaying benefits: you’ll get more each month.

The meat of the book for me is the all-important claiming decision. The book explains and discusses the important “breakeven point” for an unmarried retiree. In essence, if you expect to live to at least age 80.5, you’re better off waiting until age 70 to claim Social Security, instead of doing it earlier. You’ll get more money in the long run that way.

For married couples, the situation is similar, but more complex. The book walks you through the issues for the higher and lower income spouses. It turns out that delaying benefits to maximize the higher-earning spouse’s amount becomes even more valuable for couples, since that larger sum lasts for the duration of both their lives.

The book concludes with six invaluable Social Security rules of thumb. Among other points, they capture an essential tradeoff we all must make: the longer you expect to live, the better it is to delay taking Social Security benefits. But, the higher the real rate of return you can earn on your investments, the better it is to take benefits early.

Open Social Security

The Social Security Administration offers simple, free benefit calculators on its site, and there are others available across the web. But this type of calculator just tells you what you ought to get, monthly, depending on when you claim. They don’t go beyond that to compute when you should claim to maximize benefits.

More sophisticated calculators will optimize your Social Security claiming strategy so you get the most to which you are entitled. Piper put his programming talents to work and created a calculator for optimizing benefits called Open Social Security. It’s quick and easy to use, and it’s totally free!

Open Social Security does the calculations for each possible claiming age (or, if you’re married, each possible combination of claiming ages) and then tells you which claiming strategy is expected to provide the most dollars over your lifetime. It takes an approach based on probabilities and life expectancy.

So, for each claiming strategy being investigated, the calculator multiplies spousal and retirement benefits in a given year by the probability of being alive in that year (using average life expectancies), to calculate a probability-weighted annual benefit. Those annual benefits are then discounted to the present to account for the time value of money, and summed.

The end result is a total present value. The claiming age(s) that have the highest present value are then suggested as optimal. In our case, the recommended strategy looks like this:

• Spouse files for his/her retirement benefit to begin 5/2023, at age 64 and 9 months.
• You file for your retirement benefit to begin 7/2030, at age 70 and 0 months.
• Spouse files for his/her spousal benefit to begin 7/2030, at age 71 and 11 months.

This analysis confirms the general advice from the book for higher-earning partners to delay claiming benefits as long as possible.

Open Social Security offers a handful of options for special situations. The one that interested us most was the ability to choose different mortality tables for the probability calculations. This could be important if you feel that your health differs significantly from the average.

Our Debate

In addition to the standard Social Security Period Life Table, we ran our calculations using the Non-smoker Super-preferred table, which represents an average life expectancy of roughly five additional years.

When using those super-preferred tables, the calculator recommended delaying my wife’s claiming by about a year and a half. That’s because longer lifespans will benefit from delaying and collecting a higher benefit.

Should we do that? We debated which health profile to assume.

On one hand, protecting against longevity risk by maximizing monthly income seems more important than maximizing lifetime income if you die early. The downside of not getting quite so much if you die in your 60s pales next to the downside of running out of money in your 90s.

But, in the end, we decided to hedge our bets by assuming our health was average and starting Caroline’s Social Security sooner. That is also a hedge against possible future cuts in benefits. And it could also help protect our portfolio from damage during additional stock market downturns.

As long as we have minimal protection against longevity risk, a healthy investment portfolio seems like our best bet for long-term security. And, even if we take Caroline’s benefits early, we still get a great deal of longevity protection by delaying my benefits until age 70, which is our plan.

Social Security Solutions

Despite my confidence in Open Social Security, before making such a big financial decision, I wanted a second opinion. I decided to consult one of the leading Social Security calculators that I reviewed years ago. So I paid $20 for the basic Personalized Report from Social Security Solutions.

At one time this was a prominent and respected calculator. I cannot say for certain where it sits in the pecking order now, since I didn’t do another exhaustive review. But the user interface and the textual help occasionally felt a bit dated and awkward. The calculator doesn’t feel like it’s received many updates in recent years. However, the website notes the company was recently acquired by T. Rowe Price, so presumably the calculator will be well supported going forward.

The recommended strategy from Social Security Solutions is similar, but not identical, to Open Social Security:

  • Spouse begins benefits based on her earnings record in April 2025 at age 66 and 8 months.
  • You begin benefits based on your earnings record in July 2030 at age 70.
  • Spouse adds spousal benefits in July 2030 at age 71 and 11 months.

The main difference is Caroline waiting about two years longer to begin benefits.

Social Security Solutions says the recommended solution is “in line with two goals shared by most retirees: maximizing expected lifetime benefits and minimizing longevity risk.” But no specific numbers or analysis is presented to back up how this trade-off is optimized.

Social Security Solutions appears to simply choose the claiming strategy that maximizes lifetime income for your entered life expectancy. Yes, it requires life expectancy as an input — always a dubious proposition. Whereas Open Social Security models that parameter using mortality tables and probabilities. The user doesn’t need to guess at how long they’ll live.

In a page explaining the theory behind their calculator, Social Security Solutions tells us that “the criterion to maximize cumulative lifetime benefits is consistent with the criterion to maximize the present value of benefits, but the former is easier to explain.” Further, the default Analysis Settings are 0% for discount and inflation rates. This makes it appear that Social Security Solutions is essentially ignoring the time value of money. That might be OK for a back of the envelope calculation, but seems like a serious limitation for a commercial tool.

In short, the analysis offered by Social Security Solutions appears less sophisticated to me. Where the two calculators disagree, I’m going with Open Social Security for our decision.

Applying for Benefits

After making our claiming decision, we applied online for Caroline’s benefits at the Social Security Administration web site. Checking all the input carefully, the entire process took us about 30 minutes.

Our first step was to carefully scan her earnings history. Any understated or missing earnings years could seriously impact your benefit.

Following that, we needed to answer several dozen questions. It reminded me of filling out tax forms. Most of the questions were straightforward, but a few were vague or puzzling. And the online help wasn’t always clear.

The question we found most baffling at first was whether Caroline “Wanted to enroll in Medicare Part B?” She is not yet 65 so we were going to sign up for Medicare separately in a month or two. Why was the SSA asking now, and why only Part B, not Part A?

From my initial research, it appears that you are automatically signed up for Part A when you have Social Security and reach age 65. But more understanding and information will be forthcoming as we move through this process and I post an article on Medicare.

We were pleased to see that you can enter a future date to receive benefits, so applying a little early is no problem. We were also pleased to enter our direct deposit information and know we’ll receive Caroline’s benefit as an automatic deposit into our checking account each month.

A few hours after completing the application, Caroline received a follow-up confirmation email saying the SSA would be processing her application and that a representative might call her for more information. So far that hasn’t happened.

We were also told we should receive a letter in the mail within 30 days with a decision. Meanwhile, we could check the status of the application online. Doing that as this post went to press, we were told that a Social Security representative had begun reviewing our application and that the review usually takes two to four weeks. Presumably our automatic deposits will begin at that point.

With a note in my calendar to apply for my Social Security benefits when I turn 70 in some years, we are done with this process for now!

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[The founder of CanIRetireYet.com, Darrow Kirkpatrick relied on a modest lifestyle, high savings rate, and simple passive index investing to retire at age 50 from a career as a civil and software engineer. He has been quoted or published in The Wall Street Journal, MarketWatch, Kiplinger, The Huffington Post, Consumer Reports, and Money Magazine among others. His books include Retiring Sooner: How to Accelerate Your Financial Independence and Can I Retire Yet? How to Make the Biggest Financial Decision of the Rest of Your Life.]

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16 Comments

  1. I applied online six months before my 62th birthday (Early March.) It took them around six weeks to get me approved and I will be getting my first check in the third week in June.

    I retired at 58 (And very happy to have done so!). Yes, I debated the 62, 65, 67, 70 question. I initially was going to wait until 65, but after working out all the numbers, I decided on 62.

    I’ll be getting three years of payments by the time I am 65. It would take nearly a decade to make up those three years vs the increased amount I’d get at 65.

    This way, I do not have to touch my savings at all and I will have money left over to save/invest/enjoy.
    At the very least, it will contribute to pay for my ACA insurance (Disadvantage: Premium will increase because of the SS income).

    I am single and have no children. My father was running marathons 75 and always watched his health. He died at 75. That weighed heavily on my decision.

    The decision on when you get your social security goes far beyond just looking at the eight percent increase you get for every year you wait. You really must sit down and analyze your own personal situation before you make a decision.

  2. One variable to consider if, like me, you’re receiving Obamacare subsidies is that any SS benefits you or your spouse receive will be considered ordinary income and result in an increase in your modified AGI. If not careful you might lose your subsidy eligibility. For that reason alone we’ll hold off on claiming SS benefits until we’re both on Medicare. My wife will be on Medicare shortly but I’ll have another four years to go.

  3. There is no cost to Medicare Part A for most of us. However, there is a cost (which varies) to Part B, and it will be deducted from your wife’s Social Security check prior to the direct deposit eventually. They will also do this with the Part D prescription insurance if chosen. And they are probably asking because at age 64 and 9 months, she can sign up for Medicare to start the month she turns 65.

  4. I was surprised that you didn’t cover in more detail the “opportunity cost” of delaying SS and instead pulling funds from investments to cover living expenses. I factored that into my decision and elected to pull the trigger on SS at FRA (plus 8 months while I waited for my wife to reach FRA) rather than 62, and my wife filed for Spousal at the same time. Then at 70 my wife filed for her full benefit and collected an additional $900 per month. This strategy allowed us leave those funds in the portfolio for those additional years between 62 and FRA. As for waiting until 70, we have an active life now and but who knows after 70.

  5. Your description on the timing of taking spousal benefits is confusing me. Why register for spousal benefits after both partners are older than 70.

    My birthdate is June 28, 1952 and my wife’s birthdate is October 28, 1952. When I reached 66 Full Benefit Age I started receiving SS Benefits with the idea that my wife would soon be claiming spousal benefits. A few months later my wife filed for spousal benefits and received 1/2 of my benefit amount.

    This past October 2022, my wife turned 70 and she requested full benefits under her name.

    The advise I followed and the timing of our benefits was suppose to provide us the best SS benefit total amounts. Was there a better option?

  6. I bought the $40 version of SS Solutions and it was a total bust. Zero product support, no way to change original PIA inputs even for the higher level No help options or call backs on the support phone #s. I can’t even find anywhere to leave a bad review. Open SS is far superior and I could have had a couple couple cocktails instead!

  7. Social Security is not just a redistribution program from the working age to the retirees. Beginning in 1982 with the Greenspan commission today’s retirees “Banked” a couple of trillion dollars to fund our retirements. We are not totally dependent on working folks.
    Also , a part of the program is a redistribution to those with lower average incomes – the bend points of the program are set to pay significantly better benefits to the bottom brackets than the higher brackets. It is this “welfare” portion of the calculation that allows benefits to be gamed. (see https://shawnpheneghan.wordpress.com/2019/11/25/gaming-social-security/ ).
    As for “claiming decisions” all of the calculators you mentioned are merely financial decision makers. I believe that, on average, delaying (particularly for the higher income) is generally a financial winner. There are however other considerations – not the least of which is maybe you want to buy a boat.
    Finally, I applied for my wife’s disability, which changed to SSRB at 65, my spousal benefit on her account (a now expired option) and finally my own SSRB entirely online. My understanding is that this saves a lot of hassle when compared to contacting SSA by phone or in person.
    Finally, please note that signing up for PartB (or C/D) is optional. There is of course a penalty for delaying, but you are not required to have Part B. There is a window for getting it that has no penalty. If you want it (and most people do) don’t miss the window.

  8. I retired in 2022 at age 65 and plan to delay social security until age 70. One reason is my spouse is much younger. I worried about the impact of drawing down my 401(k) until starting social security. I used Excel to graph my expected 401(k) balance verse the percentage of expected household expenses social security will cover. This helped me consider the 401(k) drawdown similar to buying an annuity – spending money today for a future paycheck.

  9. I’m a decade or so ahead of you and I did very much the same research and analysis when retirement and Social Security loomed in my future.
    I was the high wage earner in my family. I often commented that I had the misfortune of paying the max contribution by always having a salary above the cap for nearly my entire career, at least after college.
    Initially, I, like many thought I’d never see much from SS so I planned ahead and saved my own retirement funds in a couple 401k’s.
    It was a surprise when I ran numerous calculators and models to discover I could maintain my pre-retirement std of living in retirement without withdrawing more than 4% of my projected 401k funds.
    I was in for an even bigger surprise after I retired, it’s been 6 years now, that we have lived comfortably with out any new austerity actions, on our SS checks and a modest pension from a job I left 35 years ago. We haven’t touched our 401k accounts, although the markets and inflation have not been good to them, and they continue to grow albeit much less than I had projected.
    Additionally, our cash savings continue to grow also as we don’t spend as much as we have coming in, even though we bought a new home, twice our old one’s value and do whatever we want.
    My advice, use the calculator to convince you you need to save to control your own destiny financially and then be surprised when things break your way.

  10. We are currently planning on both filing at 70. I ran the Open SS calculator and it suggested my wife take SS at 62 and I wait until 70. That would supposedly give a 3% overall increase in lifetime benefits. The calculator however does not take into account the tax impact of the additional income, or the fact that whan you take SS you need to sign up for Medicare. We are on US Government FEHB Health insurance which covers us both throughout retirement. If you are on Medicare you cannot have a HSA. In addition, the increased income from SS before 70 reduces the amount of Roth conversions we can do to reduce future RMDs. So, my point is, for a simple case, it’s easy, if you have more moving parts, not so much.

  11. Welcome to the world of “old people”! First, there is no one answer for everyone. There are too many factors involved to come up with a single solution. And filing at 70 is not a single solution, it is a goal if you can make it that far. I am a volunteer SHIP counselor (SHIP is a federal program where there is a branch in every state to assist folks with Medicare questions – free and totally unbiased – no compensation from insurance companies is allowed) so I can shed some light on some of your questions. Part A (hospital) is free for those who have a minimum of 40 work quarters. Anything less, you have to pay a premium. The reason for the question on Part B is a bit of a head scratcher given you can only enroll in Medicare after age 65 (although you could be younger but would have to be deemed disabled by Social Society or suffer from a dreaded disease like kidney failure or Lou Gehrig’s disease. The reason you would decline Part B coverage is there is a premium required (even with the 40 quarters) and may not be cost effective if you continue to work and receive employer insurance. Note the Obamacare or COBRA does not count as “creditable coverage” so if you don’t sign up when you should, you will be penalized with an increased Part B premium for the rest of your life. One caution about Social Security benefits. I applied after reaching Full Retirement Age (66 in my case). I was surprised that I needed to speak with a SS counselor to complete my application. Long story short, SS was offering up to a year of benefits as a lump sum however my monthly benefit would be lowered to where it would have been a year ago. So be aware of this SS “strategy” – seemed to me to be worse than a “deal” offered by a car salesman. Transitioning into federal benefits is a challenge for all – FIRE or not.

  12. I retired 3 years ago at age 61 and opted to begin my SS at age 62. My husband retired 4 years ago and opted to begin his SS at age 63 1/2. We both love being retired! Our reasoning:
    1. Concern over viability of SS system
    2. We will begin my pension and our annuities when I turn 65 (all have joint survivorship benefit for spouse left standing!).
    When one spouse dies, one SS income is gone. Felt it best to let our joint survivorship investments, pension and 401k’s continue to grow.

  13. I just turned 70. . . My husband is 74. I am the higher earner and the numbers for us were clear. He filed at 62 and I waiting until I was 70 (my application, btw, was in process for about 5 weeks). No one else was giving me 8% a year. And I stashed enough cash to pay our living expenses for the 2 1/2 gap between when I quit working and now. I haven’t touched investments since 2020 and don’t plan to until 2025. Reinvesting dividends has kept my portfolio at acceptable levels.

    I also had the good luck to fall into the now closed spousal restriction benefit (for spouses born before 1954 who’s spouse had already filed) so I received half of HIS benefit from my FRA until now, when I was able to apply on my own benefits. His benefit is still more than 50% of my FRA benefit so we don’t plan to make any more changes. Social Security will now provide 65-75% of our annual expense needs of $100-$110K. This amazes and delights me.

  14. Hi Darrow! Thank you, thank you, thank you. While I know my breakeven point for myself (it’s easy since I’m single), my friends come to me for advice. When they’re married, it’s difficult to explain to them the choices that Open Social Security can visually show them. One is turning 62 while the other is 64 and still working for now. I face the Medicare decisions within a year. Pay now or pay later – freedom to go to any doctor? What’s the best individual choice – I wish there was an easy answer to that. Great article! I’m so glad I’ve been following along with your blog. ~smile~ Roseanne

  15. I have not heard any one mention a web site that I got accurate and thorough explanation on the varies options to claim at varies ages, and how the benefit is calculated by SSA until I found this one written by a Google software programmer back in 2017. His name is Greg Grothaus. The site is
    https://ssa.tools/.
    You have to get your earnings record from SSA.gov, then copy and paste into the web browser, it will then do its magic. If you and your spouse are planning together you can add her/him into the calculation but you must know her/his PIA.
    When you are finish and close your browser all the info will be disappeared. No personal info required.
    BTW, this year when I checked at this site before I reach 70 and filed, it gave me the exact amount of my benefit included the COLA as well. Have anyone try this site? Check it out.

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