Bug In Online Social Security Benefits Calculator?

[m970916a]

 My plan was to wait until age 70 to collect my Social Security benefits based on getting an extra 8% per year for delaying. The figures shown on the Social Security web site don't line up with this. I am currently 68 years and 4 months old. The Social Security benefit estimator shows that if I retire in Jan 2024 I would receive $3851, in Jan 2025 $4113 and in Sep 2025 $4288.

Taking the Jan 2024 figure of $3851 and multiplying by 1.08 yields $4159 (vs the estimate shown online of $4113 for Jan 2025).

Taking the Jan 2025 figure of $4113 and multiplying by 1.0533328 (8 months at .0066666 increase per month) yields $4332 (vs the estimate shown online of $4288 for Sep 2025).

What am I missing here? This seems like it should be pretty basic math. The actual figure seems to 

be 6.8% rather than 8%

[fffred]

@m970916a 

The web-based calculators are limited and approximate. For critical analysis such as you are doing I suggest using the SSA's software "Anypia32" that you can download and install on your computer. This program provides critical analysis of many situations and should give results very close or identical to actual benefits.

You can read about Anypia32 here https://www.ssa.gov/oact/anypia/download.html and read the program manual here https://www.ssa.gov/oact/anypia/download/anypia32.pdf. Anypia32.exe is updated and released annually to consider changes in laws, COLA, etc.

Using Anypia32 I found the SSA web calculators to generally match up closely or exactly to the more accurate calculations; it just required some understanding of what was causing any differences ...assumptions, the January rule, etc

[m970916a]

Thanks. I see your point and I understand now. You have to admit that it is very confusing when the Social Security web site states that the 12 Month Rate of Increase is 8% (for those born in 1943 or later) and then they display 2 values 12 months apart. Normally you would expect the second figure to be 8% greater.

https://www.ssa.gov/benefits/retirement/planner/delayret.html

Next question: If I want to actually receive my first Social Security check in Jan 2025 I would start Social Security in Dec 2024, right? In this case, the Jan 2025 check is actually the Dec 2024 benefit (basically the same as Jan 2024 since no Delayed Retirement Credits are applied during the year) and then the check for Feb (technically, the January benefit just paid in Feb) would include the Delayed Retirement Credits for Jan-Nov 2024, right?

[Tonster521]

@m970916a The 8% Delayed Retirement Credit is confusing for many folks. The SSA does not help explain the concept which is actuarial rather than gaining/receiving a greater SS Benefit. Granted, your SS Benefit increases, but you need to account for the loss of SS Benefits that are payable during the period you delay. For example, using your PIA that I developed based on the info you provided, you will delay approximately $150,972 ($3282 X 46 months). I have not included any increases for COLA. It will take about 150 months to recoup those delayed SS Benefits which is about 12.5 years ($150,972 divided by $1006 (estimated delayed retirement credits) or somewhere between your age 82 to 83. This is at a 0% discount rate which is the same as putting the money in a checking account that does not pay any interest or the proverbial " in the mattress" for at least 12.5 years. Earning interest on that approximate 4 year delay period will push your recouping time frame beyond ages 82 to 83. For example, at a 3% discount rate for 4 years, you will need to recoup $164,767 ($39,384 X 4.1836) which at $1006/month is about 164 months or between ages 83 and 84. The point is that you are in a negative cash flow for 12 or more years depending on your discount rate. So, longevity is an important factor to consider. Hopefully, that will be positive.

With regard to your question concerning the timing of SS Benefit payment which is essentially a cash flow question, I think you are correct based on the SSA 's website. However, the SSA software has to be extremely fast and accurate to update and pay past Delayed Credits over the December to January scenario that you described. I simply do not know if that is reality with the SSA. Good Luck. 

[Tonster521]

@m970916a It appears that you are developing your amount of Delayed Retirement Benefits as if they were an investment compounding at 8% per year. Your SS Delayed Retirement Benefits do not compound. Your Primary Insurance Amount (PIA) increases by 2/3 of 1% ( about .67% or .0067) each month you delay your SS Retirement Benefit. Please note that I have rounded the fractions so  all readers may comprehend the concept which is communicated at 8% per year. Based on the info you provided, it appears you were born in September 1955. So, your Full Retirement Age (FRA) is 66 years 2 months or November 2021. Using the amounts that you provided from the SS Estimate Calculator, I developed your PIA as of November 2021 at $3282. Based on that amount, your PIA will increase approximately $21.88 for every month you delay starting your SS Retirement Benefit or about $262 per 12 month period (call it a year). Once again, I am rounding both money and decimal percentages.Based on your amount of Delayed Retirement Credits, your Jan.2022 was $3327, Jan. 2023 was $3589, Jan. 2024 was $3851, Jan. 2025 will be $4113, and Sept. 2025 will be 4288. If you delay to September 2025, your PIA will increase 30.667% or $1006 ($3282 X .30667). I am providing a link to SS info https://www.ssa.gov/OACT/ProgData/ar_drc.html Hopefully, you will understand that delaying SS Benefits is not the same as compounding an investment at 8% per year. FYI, using your approach, I arrived at less than 7%. 

[GailL1]

Your figures on the website are ESTIMATES - but maybe try the monthly figure for the computation to see if you get closer.  I do not know where the cut off is  on this estimated figure - but I think it is birthdate rather than calendar year although  calendar year is when the credits are added, I believe.

It maybe the 69 year part of the formula that you are missing.  This tells you how they are suppose to compute it.

SSA.gov Benefit Planner - Delayed Retirement Credits.

[m970916a]

 Nope. The link you posted shows a 12 month rate of increase of 8% for those born in 1943 or later. The dates I posted are Jan 2024 and Jan 2025, 12 months apart. Your suggestion of doing it month by month doesn't work. The online benefits calculator does not show increasing amounts month by month for delaying: the accumulated benefit for delaying is only shown the following January. In other words, for a particular retirement year, the amount shown stays the same whether you set it to Jan, Feb or any month that year. It's only when you set it for Jan of the following year that the delayed benefit for the whole previous year shows. Try it yourself. It works like that in real life as well. If you turn 69 in July and start taking your benefits then, you only get the amount you would have gotten that January and then the  following January the benefit is adjusted to give you credit for waiting the extra 6 months to start.

[MargieB875473]

You are correct . . . I have the same frustration . . .  Social Security provides no reassurance that the amount I will be receiving applying in October 2024 will be actually greater than I would have received had I applied in any of the previous 9 months going back to January.

[fffred]

@MargieB875473 

There's a 'thing' with the delayed retirement credits (DRCs). This SSA page (https://www.ssa.gov/benefits/retirement/planner/delayret.html) states:  "If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits."

I was aware of this issue and waited until I was 70 to get benefits. I found the application a bit confusing (it's not clear if they want you to enter the month you want benefits to begin or the actual month in which you get the payment in arrears for that previous month) and was worried that I would get SS at age 69 and 11 months. haha (It turned out okay for me).

So what they're saying is if someone has their benefit start at age 69 (not 70) then for the first year of benefits the benefit is calculated based on their age at the January of that first year. Thus it will seem that you lost out on some DRCs (and you did). But everything is adjusted the following January and the correct, full amount of DRCs is applied to their benefit. I made the statement once that it wasn't clear to me if the several months worth of missing DRCs was ever made up to the beneficiary but I doubted it. In later reading in the actual SS laws (Code of Federal Regulations, "CFR") it was apparent that those missing DRCs are not made up.

This issue has been discussed in the forum in several threads. Ahh, here is one discussion I recall where I made some comments, see https://community.aarp.org/t5/Social-Security/SSA-gov-plan-estimator-confusion-start-date/m-p/241635...

I hope this addresses your question. Maybe I misunderstand your question.