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Delayed filing at age 70 vs reduction in benefits in 2034

Most of the financial columns I've read advocate waiting until age 70 to claim SSA benefits, but I've read no discussion about how to balance that out against an automatic 21% cut in benefits in 2034 when the SSA trust fund runs out. Everyone is assuming that Congress will do something about the trust fund problem before then, and I think the assumption is unwarranted.

 

Let's look at a male, born June 1 1960, with full retirement age (FRA) at age 67 (June 1 2027). Let's say his FRA benefit is $2000 / month. He decides to delay filing for his benefits until age 70 (June 1 2030), which increases his benefits by (70 - 67) * 8 percent a year, or 24% over his FRA benefits. At that point, he starts receiving benefits of 1.24 * 2000 = $2480 per month, and continues receiving those until June 1 2034, receiving a total of (2034 - 2030) * 2480 * 12 = $119040

 

On June 1 2034 (at age 74), his benefits are reduced by 21%, to 2480 * (1.00 - 0.21) = $1959.20 per month. He dies at the expected lifetime (86.1 years) on July 7 2046, receiving a total of (86.1 - 74) * 1959.20 * 12 = $284475.84 over the period from age 74 to age 86.1.

 

Without the benefit reduction at age 74, he would have received (86.1 - 74) * 2480 * 12 = $360096, and the reduction has caused him to lose 360096 - 284475.84 = $75620.16 of the benefits promised with his delay of filing to age 70. He has also foregone benefits that would have been paid from his FRA (67) to age 70, which would have provided a total of (70 - 67) * 2000 * 12 = $72000 (a little less than his loss due to benefit reduction in 2034).

 

My question: he agreed to not receive those $72000 between age 67 and age 70 as his part of the contract with the government. The government is going to abrogate that contract in 2034. Will they at least refund the $72000?

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