Open Social Security calculator says my wife shoul...

JeffR603421 · ‎08-04-2023

Hi. I am 64 and my wife 53. We both have the same Primary Insurance Amount. I plan to retire in 2024 and she will in 2025. We are not depending fully on social security. I originally thought I would claim SS at 70 and so would she--since we don't have a lower wage earner. And get our claims independently. However, the Open Social Security calculator https://opensocialsecurity.com/ (use the advance option where it says "Click here" up top) says to maximize total lifetime dollars for us, I should claim at 70 and she at 62 and 1 month. Huh?

The Bogleheads agree: "The idea is that the lower earner starts getting their own benefit as early as possible. Later on, they switch to the spousal benefit. There is a penalty for claiming early, but when you take the total lifetime benefit into account, you can come out ahead. The calculator shows you the total lifetime dollars. That is what it tries to maximize." "the calculator in default mode is trying to maximize lifetime dollars with a life expectancy approach. Other calculators such as Maxfi, base to a longevity approach."

I am unsure why this would be. Sure I want to maximize total lifetime dollars and I would love it if my wife could claim at 62 when I am still around and active (hopefully). But I would have assumed that would only be true if she were claiming spousal benefits and not her full SS.

Any help?

fffred · ‎08-12-2023

@JeffR603421

@Tonster521 has given the theoretical principles that govern the analysis of benefits based on income, ages, etc. Very useful information.

Additionally, the Open Social Security software should let you view the calculations for each year of a particular scenario so that you can confirm for yourself that the "optimal" numbers given by the software for planning are correct and reasonable. The table "Year By Year Benefit Amounts" shows clearly the benefit amounts (you and spouse) for each year of the scenario. You can set up a different scenario by specifying the retirement ages and compare the results of this to the "optimal" scenario determined by the software.

(a new feature of OSS is the graphic...a "heat chart"... at the bottom of the report that provides a visual of various alternate scenarios)

Another trick would be to enter the data for your wife first and you as the spouse. Theoretically, the program should return the same results... you (now the spouse) taking benefit at 70 and your wife (the main person in this scenario) taking at 62 and 1 month. (I did this and got the expected results; this provides more confidence in the software.)

I have studied Open Social Security with tricks like these, and even more so I was studying i-ORP software (awesome software now somewhat defunct) and commercial software Maximize My Social Security (in fact, it might be worth your while to use MMSS for the year's subscription just to get another view/opinion).

Note that all the programs will be sensitive to mortality and to interest rates. All programs should allow you to customize this information to an extent. By "sensitive" I mean that the results will be sensitive to these variables.

It is nice that Open Social Security provides the option to impose a reduction on SS benefits at the time that the SS Trust Fund is anticipated to run out. Probably worthwhile seeing what effect this may have on your plans.

My own situation is somewhat similar to yours: wife is 11 years younger but she has no US-based income or SS. I just took my own SS at age 70 and we plan for her to take spousal at 62. That will provide some additional income while both of us are still alive and relatively young. Should I predecease her then she gets my full benefit (including delayed retirement credits) and it will not be reduced because she claimed Spousal "early". This benefit will allow her to continue on with a good income. The alternative would be for her to claim at 67, we would have more monthly benefit income then but we'd be older and not so able to enjoy it. So that's the path we chose.

Good luck!

Tonster521 · ‎08-06-2023

@JeffR603421 First, life expectancy is an important factor with regard to SS Benefits. Also, it changes as you attain greater ages. For example, based on the SS Mortality table, at Full Retirement Ages (66 through 67), the gender neutral average life expectancy is between ages 83 through 84. However, if one has already attained age 84 and beyond, average life expectancy is greater. I do not know the factors that the Open SS Calculator uses.

With regard to you and your spouse's SS Benefits, you will be age 73 when your spouse attains age 62. Remember, delayed retirement credits do not increase spousal benefits. Also, you need to review the provisions regarding deemed filing.https://www.ssa.gov/benefits/retirement/planner/claiming.html#:~:text=Deemed%20filing%20means%20that.... When your spouse files for SS Benefits, it is an application (deemed filing) for both retirement and spousal benefits. If your Primary Insurance Amounts (PIA) are the same, your spouse's retirement benefit will be greater than her spousal benefits at age 62. When a married couple have the same or close to the same Earnings and PIA, in most cases, Spousal Benefits are not payable because their retirement benefits exceed their Spousal Benefits. In the past, this was referred to as a "marriage penalty". I have not seen that reference for some time.

At any rate, I would focus on Survivor Benefits inasmuch as your delayed retirement credits are included with your spouse's Survivor Benefit.

JeffR603421 · ‎08-08-2023

Thanks for the input. A bit complicated--or I'm dense 🙂

So in short, is it likely we would be better off actually claiming my wife at 62 or delaying to 70 for her too? Best benefit for her especially, assuming we both make it to our respective life expectancies, we are equal wage earners, and I am 11 years older and claim at 70?

Tonster521 · ‎08-12-2023

@JeffR603421 Based on your gender and age difference, there is a greater probability that you will pass before your spouse. So, Survivor Benefits based on your SS Benefit including delayed retirement credits will be payable to your spouse. If your spouse is age 65 or greater at that time, she will receive 100% of your SS Benefit. The SSA has indicated that the decisions to elect early (age 62) or delay (age 70) are actuarial equivalents of your SS Benefit at Full Retirement Age (FRA) based on average life expectancy (ages 83 through 84) and approximately a 3% discount rate. So, delaying your SS Benefits to age 70 will provide a greater monthly amount,but could provide less overall SS Benefits should you pass before age 83 (some folks refer this to a break even point in time).I will try to copy and paste the most current SS Mortality Table https://www.ssa.gov/oact/STATS/table4c6.html So, if your spouse is considering delaying SS Benefits to age 70, she will not actually gain any value until she attains age 83 or greater using a 3% discount rate (time value of money). Greater discount rates (i.e., 4%,5%, etc.) will move the break even point in time to ages 84 thru 90. Using age 83 as her break even age means you will be age 94 if alive. If not alive, your spouse will be eligible for 100% of your SS Benefit (Survivor Benefit) as long as she applies after attainment of her age 65.So, I agree with the calculator that your spouse should apply at age 62. Why risk the loss of that cash flow. If she does not need the money for current needs, she could invest that money.