Sep 6, 2013 ... Husband Exceptional / Wife Exceptional Life Expectancies. 3. ... For your report, a
"normal" lifespan is based on the typical life expectancies of ...
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Maximizing Your Social Security Benefits Your Personal Roadmap
This is an example of a married persons report. In addition to 3 recommended claiming strategies, we also show you the implications of up to 240 alternative claiming strategies.
WHAT YOU’LL FIND IN THIS GUIDE
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1. Introduction: You Personal Roadmap to Maximizing Your Social Security Benefits, and a Chance to Review the Information You Gave Us
2. Your Optimal Claiming Strategies: A Summary of the Actions You Should Take to Optimize Your Social Security Benefits 1. Husband Normal / Wife Normal Life Expectancies 2. Husband Long / Wife Short Life Expectancies
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3. Husband Exceptional / Wife Exceptional Life Expectancies
3. The Details Behind the Numbers: Explanation of Your Strategies and Alternative Strategies Available to You
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1. Husband Normal / Wife Normal Life Expectancies
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2. Husband Long / Wife Short Life Expectancies 3. Husband Exceptional / Wife Exceptional Life Expectancies
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4. Answers to Frequently Asked Questions
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Your Personal Roadmap to Maximizing Your Social Security Benefits One of the most important financial decisions you will ever make is when to start taking your Social Security benefits. Using the information you provided, we’ve analyzed every one of your options (also known as claiming strategies) and outlined your Optimal Claiming Strategy (the actions you should take to maximize your Social Security benefits) as it pertains to your chosen life expectancy scenarios.
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We used this information to get started: Husband’s year of birth: Husband’s Full Retirement Age (FRA): Husband’s monthly Social Security payment at Full Retirement Age:
1955 66.17 $2,435
Wife’s year of birth: Wife’s Full Retirement Age (FRA): Wife’s monthly Social Security payment at Full Retirement Age:
1951 66.00 $1,321
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Your monthly benefit is increased by 8% for each year you wait to start claiming your Social Security benefits after your FRA, up to age 70. Conversely, depending on your individual FRA, you’ll get 25% - 30% less than your FRA benefit if you cash in at 62. Next we looked at several life expectancy scenarios. These scenarios enable you to think about the number of years you expect to collect Social Security benefits. For your report, a "normal" lifespan is based on the typical life expectancies of men and women approaching full retirement age. A ‘‘long’’ lifespan makes the assumption that 25% of men or women will outlive you. Finally, a ‘‘short’’ lifespan makes the assumption that 75% of men or women will outlive you.
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You chose to analyze these scenarios:
Husband’s expected lifespan is 82
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Wife’s expected lifespan is 86
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1. Normal / Normal:
2. Long / Short:
On this page we show you the information that you gave us about you and your spouse.
Husband’s expected lifespan is 88 Wife’s expected lifespan is 78
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3. Exceptional / Exceptional:
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Husband’s expected lifespan is 100 Wife’s expected lifespan is 100
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Now let’s take a look at what you need to do to maximize your Social Security benefits.
The life expectancies for scenarios 2 and 3 can be customized by you.
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Your Optimal Claiming Strategies: A Summary of the Actions You Should Take to Optimize Your Social Security Benefits 1. NORMAL (HUSBAND) AND NORMAL (WIFE) LIFE EXPECTANCIES
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In this scenario you wanted to consider a Normal life expectancy for the husband and a Normal life expectancy for the wife. Let’s see how your claiming strategy, and your lifetime benefits, will change if the husband expects to live to age 82 and the wife expects to live to age 86.
1. The husband files for and begins to receive retirement benefits at age 62, year 2017.
2. Provided the wife has reached full retirement age (age 66 and 0 months), the wife files for a spousal benefit on the husband’s record as soon as possible after the husband files for his own retirement benefits. The wife should be careful to apply for the spousal benefit only, and not for her own retirement benefits at this time. 3. The wife files for and begins to receive retirement benefits at age 70, year 2021.
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When a spouse dies, family benefits usually decline to equal the higher of the two retirement benefits.
Let’s take a look at what your monthly benefits will be using this strategy: Husband’s Husband’s Age Benefit
Wife’s Age
Wife’s Benefit
Total Monthly Benefits
$0
62
$0
$0
59
$0
63
$0
$0
60
$0
64
$0
61
$0
65
$0
62
$1,805
66
$1,217
63
$1,805
67
64
$1,805
68
65
$1,805
69
66
$1,805
70
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This box explains when you should Claiming claim yourAction benefits step by step. -
$0
-
$3,022
The husband claims retirement benefits. The wife files a restricted application for spousal benefits.
$1,217
$3,022
-
$1,217
$3,022
-
$1,217
$3,022
-
$1,743
$3,548
The wife claims retirement benefits.
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$0
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After taking the above actions your Total Monthly Benefits under this strategy will be $3,548. The total lifetime value of this strategy is $579,000 in today’s dollars.
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This table is another way we explain when you should claim your benefits. Here we show your the progression of your benefits at each age.
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2. LONG (HUSBAND) AND SHORT (WIFE) LIFE EXPECTANCIES In this scenario you wanted to consider a Long life expectancy for the husband and a Short life expectancy for the wife. Let’s see how your claiming strategy, and your lifetime benefits, will change if the husband expects to live to age 88 and the wife expects to live to age 78.
1. The wife files for and begins to receive retirement benefits at age 62, year 2013.
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2. Provided the husband has reached full retirement age (age 66 and 2 months), the husband files for a spousal benefit on the wife’s record. The husband should be careful to apply for the spousal benefit only, and not for his own retirement benefits at this time. 3. The husband files for and begins to receive retirement benefits at age 70, year 2025.
This page is like the last page except that if tells you the proper claiming strategy for a different life span that you have selected. The next page is for your third lifespan choice Let’s take a look at what your monthly benefits will be using this strategy:
When a spouse dies, family benefits usually decline to equal the higher of the two retirement benefits.
Wife’s Age
Wife’s Benefit
Total Monthly Benefits
58
$0
62
$990
$990
59
$0
63
$990
$990
60
$0
64
$990
$990
61
$0
65
$990
$990
62
$0
66
$990
$990
63
$0
67
$990
$990
64
$0
68
$990
65
$0
69
$990
66
$0
70
$990
67
$660
71
68
$660
72
69
$660
73
70
$3,181
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Husband’s Husband’s Age Benefit
The wife claims retirement benefits. -
$1,650
$990
$1,650
$990
$1,650
-
$990
$4,171
The husband claims retirement benefits.
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$990
Notice how the claiming strategy differs dramatically from the previous life expectancy scenario The husband files a restricted application for spousal benefits. -
$990
$990
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$990
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After taking the above actions your Total Monthly Benefits under this strategy will be $4,171 until one person passes away, at which point the survivor will collect a benefit of $3,181. The total lifetime value of this strategy is $577,000 in today’s dollars.
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3. EXCEPTIONAL (HUSBAND) AND EXCEPTIONAL (WIFE) LIFE EXPECTANCIES In this scenario you wanted to consider a Exceptional life expectancy for the husband and a Exceptional life expectancy for the wife. Let’s see how your claiming strategy, and your lifetime benefits, will change if the husband expects to live to age 100 and the wife expects to live to age 100.
1. The wife files for and begins to receive retirement benefits at age 70, year 2021.
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2. Provided the husband has reached full retirement age (age 66 and 2 months), the husband files for a spousal benefit on the wife’s record. The husband should be careful to apply for the spousal benefit only, and not for his own retirement benefits at this time. 3. The husband files for and begins to receive retirement benefits at age 70, year 2025.
When a spouse dies, family benefits usually decline to equal the higher of the two retirement benefits.
Let’s take a look at what your monthly benefits will be using this strategy: Wife’s Age
Wife’s Benefit
Total Monthly Benefits
$0
62
$0
$0
59
$0
63
$0
$0
60
$0
64
$0
$0
61
$0
65
$0
$0
62
$0
66
$0
$0
63
$0
67
$0
$0
64
$0
68
$0
65
$0
69
$0
66
$0
70
$1,743
67
$660
71
68
$660
72
69
$660
73
70
$3,181
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$0
$0
Claiming Action
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Husband’s Husband’s Age Benefit
-
Again, note how a- change in life expectancies substantially changes the optimal claiming strategy. The wife claims retirement benefits.
$1,743
$2,403
The husband files a restricted application for spousal benefits.
$1,743
$2,403
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$1,743
$2,403
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$1,743
$4,924
The husband claims retirement benefits.
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$1,743
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After taking the above actions your Total Monthly Benefits under this strategy will be $4,924 until one person passes away, at which point the survivor will collect a benefit of $3,181. The total lifetime value of this strategy is $910,000 in today’s dollars.
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The Details Behind the Numbers
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One question we’re frequently asked is, "What if I die before I reach my ’breakeven point?’ I’d end up with more from Social Security by claiming early than if I’d waited to pursue the optimal strategy." As an individual, this is true, and only you know your personal circumstances. But keep in mind that there are two of you and Social Security treats married couples favorably. A surviving spouse is able to collect the deceased spouse’s check, assuming that check is larger than the surviving spouse’s. This is important. Social Security is an annuity. It pays benefits as long as one of you is alive, and Social Security is inflation protected so the purchasing power of your benefits will not decline as you get older. And actuarially speaking, as a couple there’s a greater chance that at least one of you will live to a ripe old age and collect that bigger check. Why, then, are the most common claiming strategies 1. Both husband and wife file for benefits at age 62, and 2. Both husband and wife file for benefits at age 66?
Perhaps it’s because there are so many (uninformed) articles about Social Security suggesting that 66, the full retirement age for most people who are claiming benefits now, is a good age to claim. True, 66/66 is a better strategy for most people than 62/62, but the optimal strategy is still better in terms of lifetime value.
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What does this mean for you?
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1. NORMAL (HUSBAND) AND NORMAL (WIFE) LIFE EXPECTANCIES Now, using today’s dollars, let’s compare the lifetime value of your combined benefits under your Optimal Claiming Strategy to the lifetime value you’d receive under a 62/62 strategy and a 66/66 strategy if the husband expects to live to age 82 and the wife expects to live to age 86.
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This graph approximates the purchasing power of your combined Social Security checks over time. The actual dollar amounts you receive will depend on future COLA adjustments.
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These graph lines show you what your family benefits will be each year. They are in today's dollars so you can image the purchasing power of your benefits in the future.
Your Lifetime Family Benefit utilizing your Optimal Claiming Strategy is: Your Lifetime Family Benefit utilizing a 66/66 Strategy is: Your Lifetime Family Benefit utilizing a 62/62 Strategy is:
$579,000 $533,000 $519,000
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In this case, your monthly benefit for the optimal strategy falls between the monthly benefits for the 62/62 and 66/66 claiming strategies after implementing the recommended strategy. But, it is not financially worthwhile for both of you to wait until age 66 to claim your benefits.
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So how much better is the Optimal Claiming Strategy? The optimal strategy is better than claiming at 62/62. In fact, if you both claim at 62, and the husband lives to 82 and the wife lives to 86, you will lose the equivalent of $60,000 in today’s dollars over your lifetime. That’s like offering to pay Uncle Sam an extra $60,000 in taxes on top of what you already owe!
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Here we show you how much you will benefit by carrying out the best possible strategy. Here the gain is an additional $60,000 Try the "Free Calculator" on our homepage to see what the gains will be for your situation.
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Husband’s Claiming Age
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If you enjoy "what-if" analysis, then we created this next table for you. In it we compare your benefits under the Optimal Claiming Strategy for Normal Lifespans (identified in blue) to benefits from all possible age combinations/strategies and show you in an easy-to-understand format the "losses" associated with following strategies other than your Optimal Claiming Strategy. Remember that your Optimal Claiming Strategy is worth $579,000 in today’s dollars? You can see here that if both spouses choose to claim at 62, you’ll be leaving approximately $60,000 on the table. Minimizing the losses at these alternative claiming ages often involves sophisticated claiming strategies. Therefore, make sure to click on the corresponding cell in the table to see the steps involved in implementing the alternative strategy at each age combination.
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Wife’s Claiming Age
62 63 64 65 66 67 68 69 70 This table can be really important for 62 -$60k -$60k -$57k -$56k -$57k -$57k -$54k -$53k -$55k you if you decide 63 -$59k -$59k -$56k -$54k -$55k -$56k -$52k -$51k -$54k not to follow the 64 -$54k -$54k -$51k -$50k -$51k -$51k -$47k -$47k -$49k optimal strategy. It shows you how 65 -$51k -$51k -$48k -$47k -$48k -$48k -$45k -$44k -$46k much you will lose if 66 -$50k -$50k -$47k -$45k -$46k -$47k -$43k -$43k -$45k Click on this cell by you choose to claim 67 -$34k -$47k -$44k -$43k -$44k -$44k -$40k -$40k -$42k running your cursor in a different year. over this number. In this table, if the 68 -$21k -$34k -$43k -$42k -$43k -$43k -$40k -$39k -$41k It will connect you to wife claims at 69 69 -$9k -$22k -$32k -$43k -$44k -$44k -$40k -$40k -$42k a description of the instead of 70, the 70 $579k -$13k -$22k -$33k -$46k -$46k -$43k -$42k -$44k best claiming loss is only $9,000. strategy if you claim A small amount benefits at those compared to the Can You Use This Table? ages. total valueHow of total In some cases, the variance in benefits you’ll receive by using a strategy different from your Optimal Claiming Note:Strategy For the family benefits may be of relatively small. This table lets you explore other options that get you very close to the maximum benefits, but sample it takes you $579,000might fit better into your overall retirement plan. to a screen that does not provide You might also be in a situation where you just can’t put your Optimal Claiming Strategy into action. The most common this information, but situation happens when one spouse has already claimed benefits and they did not claim benefits in the optimal year. if you order a report For an explanation of how to use the table to find the best strategy in this case, click here. it will tell you the best strategy for each age combination in the table.
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2. LONG (HUSBAND) AND SHORT (WIFE) LIFE EXPECTANCIES Now, using today’s dollars, let’s compare the lifetime value of your combined benefits under your Optimal Claiming This page and the following pages show you graphs and tables Strategy to the lifetime value you’d receive under a 62/62 strategy and a 66/66 strategy if the husband expects to live to for the other two age 88 and the wife expects to live to age 78. life spans that you have chosen. Notice how
this graph differs from the previous graph since the optimal scenario is verypower different lifespan changes This graph approximates the purchasing of yourwhen combined Social Security checks over time. The actual dollar
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amounts you receive will depend on future COLA adjustments.
Your Lifetime Family Benefit utilizing your Optimal Claiming Strategy is: Your Lifetime Family Benefit utilizing a 66/66 Strategy is: Your Lifetime Family Benefit utilizing a 62/62 Strategy is:
$577,000 $543,000 $526,000
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At first your monthly checks will be higher using the 62/62 strategy, but as you implement the recommended strategy, your benefits under the optimal strategy will surpass the others. Ultimately, if the wife passes away in 2029 at age 78 (represented by the decline in the lines in the chart above), the husband will continue to receive larger checks for the rest of his life than he would have under the 62/62 strategy because of delayed claiming.
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So how much better is the Optimal Claiming Strategy? The optimal strategy is far better than claiming at 62/62. In fact, if you both claim at 62, and the husband lives to 88 and the wife lives to 78, you will lose the equivalent of $50,000 in today’s dollars over your lifetime. That’s like offering to pay Uncle Sam an extra $50,000 in taxes on top of what you already owe!
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63
64
65
66
67
68
69
70
62
-$50k
-$46k
-$38k
-$31k
-$27k
-$21k
-$11k
-$4k
$577k
63
-$52k
-$48k
-$40k
-$33k
-$29k
-$23k
-$13k
-$6k
-$2k
64
-$52k
-$48k
-$40k
-$33k
-$29k
-$23k
-$13k
-$6k
-$2k
65
-$54k
-$50k
-$41k
-$35k
-$31k
-$24k
-$15k
-$8k
-$4k
66
-$57k
-$53k
-$45k
-$38k
-$34k
-$28k
-$18k
-$11k
-$7k
67
-$47k
-$56k
-$48k
-$41k
-$37k
-$31k
-$21k
-$14k
-$10k
68
-$39k
-$48k
-$52k
-$46k
-$41k
-$35k
-$25k
-$18k
-$14k
69
-$33k
-$42k
-$46k
-$52k
-$48k
-$41k
-$32k
-$25k
-$21k
70
-$29k
-$38k
-$42k
-$48k
-$56k
-$49k
-$40k
-$33k
-$29k
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62
This is the optimal strategy for this lifespan. Note that it is very different from the previous table when the optimal strategy was husband 62 and wife 70.
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Optimal choice with normal lifespans
Wife’s Claiming Age
Husband’s Claiming Age
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If you enjoy "what-if" analysis, then we created this next table for you. In it we compare your benefits under the Optimal Claiming Strategy for Normal Lifespans (identified in blue) to benefits from all possible age combinations/strategies and show you in an easy-to-understand format the "losses" associated with following strategies other than your Optimal Claiming Strategy. Remember that your Optimal Claiming Strategy is worth $577,000 in today’s dollars? You can see here that if both spouses choose to claim at 62, you’ll be leaving approximately $50,000 on the table. Minimizing the losses at these alternative claiming ages often involves sophisticated claiming strategies. Therefore, make sure to click on the corresponding cell in the table to see the steps involved in implementing the alternative strategy at each age combination.
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How Can You Use This Table? In some cases, the variance in benefits you’ll receive by using a strategy different from your Optimal Claiming Strategy may be relatively small. This table lets you explore other options that get you very close to the maximum benefits, but might fit better into your overall retirement plan.
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You might also be in a situation where you just can’t put your Optimal Claiming Strategy into action. The most common situation happens when one spouse has already claimed benefits and they did not claim benefits in the optimal year. For an explanation of how to use the table to find the best strategy in this case, click here.
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3. EXCEPTIONAL (HUSBAND) AND EXCEPTIONAL (WIFE) LIFE EXPECTANCIES Now, using today’s dollars, let’s compare the lifetime value of your combined benefits under your Optimal Claiming Strategy to the lifetime value you’d receive under a 62/62 strategy and a 66/66 strategy if the husband expects to live to age 100 and the wife expects to live to age 100.
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This graph approximates the purchasing power of your combined Social Security checks over time. The actual dollar amounts you receive will depend on future COLA adjustments.
Your Lifetime Family Benefit utilizing your Optimal Claiming Strategy is: Your Lifetime Family Benefit utilizing a 66/66 Strategy is: Your Lifetime Family Benefit utilizing a 62/62 Strategy is:
$910,000 $817,000 $732,000
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At first your monthly checks will be higher using the 62/62 strategy, but as you implement the recommended strategy, your benefits under the optimal strategy will surpass the others. Ultimately, if the wife passes away in 2051 at age 100 (represented by the decline in the lines in the chart above), the husband will continue to receive larger checks for the rest of his life than he would have under the 62/62 strategy because of delayed claiming.
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So how much better is the Optimal Claiming Strategy? The optimal strategy is far better than claiming at 62/62. In fact, if you both claim at 62, and the husband lives to 100 and the wife lives to 100, you will lose the equivalent of $178,000 in today’s dollars over your lifetime. That’s like offering to pay Uncle Sam an extra $178,000 in taxes on top of what you already owe!
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62
63
64
65
66
67
68
69
70
62
-$178k
-$168k
-$152k
-$138k
-$126k
-$110k
-$91k
-$75k
-$61k
63
-$172k
-$162k
-$146k
-$132k
-$120k
-$104k
-$85k
-$69k
-$55k
64
-$162k
-$152k
-$136k
-$121k
-$109k
-$94k
-$75k
-$58k
-$45k
65
-$153k
-$143k
-$127k
-$113k
-$100k
-$85k
-$66k
-$49k
-$36k
66
-$146k
-$136k
-$120k
-$105k
-$93k
-$78k
-$59k
-$42k
-$29k
67
-$123k
-$126k
-$110k
-$96k
-$83k
-$68k
-$49k
-$32k
-$19k
68
-$102k
-$106k
-$102k
-$88k
-$76k
-$60k
-$41k
-$25k
-$11k
69
-$84k
-$87k
-$84k
-$81k
-$69k
-$54k
-$35k
-$18k
-$5k
70
-$67k
-$71k
-$67k
-$65k
-$65k
-$49k
-$30k
-$14k
$910k
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Wife’s Claiming Age
Husband’s Claiming Age
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If you enjoy "what-if" analysis, then we created this next table for you. In it we compare your benefits under the Optimal Claiming Strategy for Normal Lifespans (identified in blue) to benefits from all possible age combinations/strategies and show you in an easy-to-understand format the "losses" associated with following strategies other than your Optimal Claiming Strategy. Remember that your Optimal Claiming Strategy is worth $910,000 in today’s dollars? You can see here that if both spouses choose to claim at 62, you’ll be leaving approximately $178,000 on the table. Minimizing the losses at these alternative claiming ages often involves sophisticated claiming strategies. Therefore, make sure to click on the corresponding cell in the table to see the steps involved in implementing the alternative strategy at each age combination.
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This is the optimal choice for this How Can You Use This Table? lifespan. This is In some cases, the variance in benefits you’ll receive by using a strategy different from your Optimal Claiming Strategy very different may be relatively small. This table lets you explore other options that get you very close to the maximum benefits, but from might fit better into your overall retirement plan. the other two scenarios.
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You might also be in a situation where you just can’t put your Optimal Claiming Strategy into action. The most common situation happens when one spouse has already claimed benefits and they did not claim benefits in the optimal year. For an explanation of how to use the table to find the best strategy in this case, click here.
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Answers to Frequently Asked Questions Social Security is a complicated system, so we expect that an attentive reader may have some questions after reading through the above analysis. Below, we answer some common questions, but if you have additional questions, don’t hesitate to email us at
[email protected].
Q: How do you determine my optimal strategy?
Q: Does this analysis take into account my other assets?
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A: We evaluate each of the many hundreds of choices you face and rank them based on what we call "Social Security Wealth." Social Security Wealth is based on your family’s lifetime Social Security benefits. It is expressed in today’s dollars and takes into account the time value of money by using a 3 percent interest rate. For more, click here.
A: No. We show you how to maximize your family’s lifetime Social Security Wealth. You may want to consult with a financial advisor to see how this information best fits into your personal financial plan. Perhaps our recommended claiming scenario is not appropriate for you. If not, we provide detailed information on dozens of other claiming scenarios so that you can find the best one for your overall financial plan.
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Q: Why do some of my monthly benefit estimates differ from those from the SSA or from other sources? A: These values are an approximation based on the information you gave us. Some other sources base their numbers on assumptions about your future earnings or future cost of living adjustments. Our number represents your purchasing power, assuming your full retirement benefit does not change.
Q: Does my claiming strategy change if I continue to work?
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A: That depends. Earnings have no effect on your benefits if you claim after you reach your full retirement age (FRA). However, if you claim before your FRA, earnings above a modest threshold amount will defer, reduce, or eliminate your benefits. Usually people with substantial earnings between age 62 and their FRA find it financially advantageous to delay claiming until their FRA or later. For more, click here.
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Q: I expect my future tax bracket to drop, but only after your recommended claiming age. Should I defer claiming until my tax rates drop? A: A substantial reduction in your future tax rates might make it advisable to delay claiming. A modest reduction usually does not alter a person’s optimal claiming pattern. For more, click here.
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Q: What do I do if it turns out the lifespans we chose are inaccurate?
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A: If you outlive your expected lifespans, congratulations! However, if you’ve already implemented a strategy there’s nothing you can do from a Social Security perspective. However, if one spouse dies earlier than anticipated, the surviving spouse may be able to alter his or her strategy. If the survivor is younger than age 70, he or she may benefit from a widow(er)’s analysis. Otherwise, he or she should contact the SSA to confirm collection of the largest possible benefit.
Q: The strategy you suggest seems complicated. How can we make sure we implement it properly?
A: We have found that some SSA representatives are unfamiliar with lesser-known strategies such as "file and suspend" and "free spousal" benefits (the restricted application strategy). When implementing unusual strategies like this, we suggest applying in person. Should you encounter resistance from SSA staff, this page should help.
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