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Scorpio

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#1
Why retirees are leaving trillions of Social Security dollars on the table



By Laurence J. Kotlikoff

Published: July 8, 2019 4:59 a.m. ET
A new study’s findings, and what could get more money in retirees’ pockets


AFP/Getty Images

This article is reprinted by permission from NextAvenue.org.

United Income, a financial planning advisory service, just released an important study called, “The Retirement Solution Hiding In Plain Sight.” Using government data and proprietary software, it calculates how much money retirees have lost, and are losing, by making mistakes about when to start claiming Social Security benefits. United Income’s answer: a whopping $3.4 trillion or $111,000 per household!

That’s enough to move half of the oldest Americans now in poverty out of that terrible state. Put another way, according to United Income, the average Social Security recipient would get 9% more income in retirement by making the “financially optimal” decision about when to claim benefits.
Increasing your Social Security benefit by 177%

According to United Income, someone who’d get a $725 monthly Social Security benefit by starting to claim at 62 (the earliest age) would see a benefit increase to $1,280 by delaying to age 70 — an increase of 177%.

By United Income’s calculations, however, only 4% of retirees make the financially optimal Social Security claiming decision. The rest of them are claiming too early. United Income estimates that 92% of retirees would be better off waiting to claim until at least 65.

The study’s conclusion: if boomer workers would take the most appropriate Social Security benefits at the right time, they’d increase their prospects for financial security in retirement.



The team that produced the study includes these impressive people: Jason Fichtner, a former chief economist and acting deputy commissioner at the Social Security Administration; Kevin Whitman, a former Social Security Administration policy research director and Matt Fellowes, CEO of United Income, who has had an impressive career studying and delivering personal financial services.

The United Income study indicates significant attention to detail and uses the best available data to answer its question about optimal Social Security claiming. So, as someone who has been a Social Security analyst for decades and co-wrote “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” I take its estimates seriously.

Personally, I would have made different methodological choices. But, in the end, I too would likely have arrived at a figure for lost Social Security benefits running in the trillions.
6 reasons why retirees are leaving trillions on the table

So why are retirees leaving trillions on the table? And how can those trillions be used to support Americans in retirement?

As United Income’s report says, “a daunting task awaits individuals striving to make an optimal decision.”

There are, I think, six reasons people make the “wrong” Social Security moves:

None of us will be kicking ourselves in heaven for not taking Social Security early.
First, many, if not most, people in the second half of life, are cash poor. They can’t wait until age 70 to collect their retirement benefit when they’d be roughly 70% higher, after inflation, than if they started claiming at 62.


Second, retirees don’t know how to value the extra Social Security benefits they’d receive in the future from exercising patience. Indeed, virtually none of the Social Security claiming tools from financial services companies I’ve seen get optimal claiming right. They focus on the actuarial value of benefits. This is off base, since any given household can’t play the actuarial averages. Social Security — by paying benefits in the form of inflation-adjusted income that don’t stop until you die — insures you against this financially catastrophic event. Properly valuing Social Security requires correctly incorporating the value of its insurance.


Read: This hybrid Social Security plan could help more people save enough for retirement


Third, the vast majority of retirees don’t use any Social Security software to make what, for many, is their most important financial decision.


The fourth reason is that retirees fear they will die before collecting what they are owed from Social Security. “Take your benefits. You could die tomorrow,” is what many Social Security staffers inappropriately tell people when they make benefit inquiries. But none of us will be kicking ourselves in heaven for not taking Social Security early. The real danger is not dying and kicking yourself in heaven for the money you could’ve received.


The fifth reason people take their Social Security benefits too early is they think they can invest that money in the stock market and make a killing. This is nuts. The implicit, perfectly safe, real investment return from waiting to collect higher benefits is three times more than you can earn on the market, based on historical averages.


The sixth reason is that Social Security recipients fear future cuts in benefits because they’ve heard Social Security is insolvent. But the politicians aren’t likely to cut benefits of current beneficiaries or people close to retirement. So a benefits cut is a worry for the young, not for those now retired or about to retire.


Read: Should we be worried about Social Security going bankrupt?

What could fix this Social Security problem

How can retirees be kept from squandering trillions?


The study’s authors suggest eliminating the option to take retirement benefits early with exceptions for those with an incontrovertible need to do so.


This will force millions to work longer, which may not be a bad thing. But it’s very Big Brother social engineering.


United Income also suggests the Social Security Administration change how it frames claiming options to the public. Instead of calling age 62 the “early eligibility age,” the researchers say, claiming at 62 could be labeled “the minimum benefit age” and age 70 could be labeled “the maximum benefit age.”


A better option is to let some take a portion — say, one third — of his or her Social Security benefit early while letting the rest of the benefit grow. This would alleviate the cash flow constraints facing so many early beneficiaries. Mechanically, this would be fairly easy to implement.


Also see: These Arizona retirees ‘couldn’t afford’ America — now they live their dream life on $2,000 a month in Ecuador


Would this plan cost Social Security more money? Yes, based on proper accounting. But the additional costs are clearly worth it


The boomers, with the help of Uncle Sam and their employers, have made a financial mess of their retirement. As this new and highly valuable United Income study shows, the boomers are compounding their financial problems by making terrible Social Security decisions.


It’s time to turn this situation around.


Laurence J. Kotlikoff is co-author of “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” an economics professor at Boston University and president of Economic Security Planning, which creates financial planning software. He also writes a regular column for Forbes. He was an independent write-in candidate for president in the 2016 election.@kotlikoff


This article is reprinted by permission from NextAvenue.org, © 2019 Twin Cities Public Television, Inc. All rights reserved.

https://www.marketwatch.com/story/w...-on-the-table-2019-07-08?mod=mw_theo_homepage
 

EO 11110

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#2
lmao!!! not even a one-micron-thick veil over this b.s.

"According to United Income, someone who’d get a $725 monthly Social Security benefit by starting to claim at 62 (the earliest age) would see a benefit increase to $1,280 by delaying to age 70 — an increase of 177%."

…......how much money retirees have lost, and are losing, by making mistakes about when to start claiming Social Security benefits. United Income’s answer: a whopping $3.4 trillion or $111,000 per household!"
 

Fatrat

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#3
This is total B.S., get out as soon as you can, work part time to whatever the max is..."If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit. " and "Once you reach FRA, there is no cap on how much you can earn and still receive your maximum Social Security benefit. The earnings limits are adjusted annually for national wage trends. In 2019, you lose $1 in benefits for every $2 earned over$17,640. "
 
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Hystckndle

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#4
Take it.
Earlier the better.
Kick back.
You deserve it for towing the line for your entire adult life.
( Live in near poverty as your buying power decreases YOY and / or deplete your savings earlier etc etc )
So many millions getting ready to hit the roles.
No surprise....been yacking about it here for years.
Good stuff Scorp.

Edit to add : Be PENAlIZED for hitting xyz bar and still wanting to work.
 
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Goldhedge

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#7
I'm taking what I can get... screw the millenials!
 

Hystckndle

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#11
Interesting stuff actually.
AT&T
GE
OIL COS
MEGA BANK
ETC
Legacy costs and spreadsheet jockeys with 1 time lump payout or
version thereof.
USA INC.
Same thing only dif.
All good , regards to all.
 

the_shootist

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#12
This is total B.S., get out as soon as you can, work part time to whatever the max is..."If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit. " and "Once you reach FRA, there is no cap on how much you can earn and still receive your maximum Social Security benefit. The earnings limits are adjusted annually for national wage trends. In 2019, you lose $1 in benefits for every $2 earned over$17,640. "
:2 thumbs up:
 

gliddenralston

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#13
Only a fucked up goobermint could manage to classify SS as welfare when they didn't contribute a phooking cent.
 

itsamess

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#14
This is total B.S., get out as soon as you can, work part time to whatever the max is..."If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit. " and "Once you reach FRA, there is no cap on how much you can earn and still receive your maximum Social Security benefit. The earnings limits are adjusted annually for national wage trends. In 2019, you lose $1 in benefits for every $2 earned over$17,640. "

Additionally,
"Benefits you lose by working before you reach full retirement age can be recouped later: When you reach FRA, Social Security increases your monthly benefit to account for the prior withholding. "

Social Security is withholding money from my retirement benefit because I'm still working. Will I get that money back?
 

EO 11110

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#15
what the propaganda piece is doing is trying to persuade you to die before getting a penny back. let's check the math using their example -

"According to United Income, someone who’d get a $725 monthly Social Security benefit by starting to claim at 62 (the earliest age) would see a benefit increase to $1,280 by delaying to age 70 — an increase of 177%."

-----------------------------------------------------------------------------------------------------

scenario 1 - take the 725 at 62 years old. put the 725 into a conservative investment that pays 5% - like a bond heavy balanced fund. by the time you reach 70 you will have $85,000 saved and continue to receive the 725 every month

scenario 2 - when you reach 70 you have zero dollars saved and begin receiving 1,280 per month. you invest your 1,280 into the same 5% investment

at age 70 - scenario 1 is a blowout winner. 85,000 to 0

===============================================================================

fast forward 10 years to age 80 -

scenario 1 - balance in the fund is now $254,000

scenario 2 - balance in the fund is now $199,000

at age 80 - scenario 1 is a blowout winner, up by 55,000

----------------------------------------------------------------------------------------------------------------------------------------

fast forward 10 years to age 90 -

scenario 1 - 531,000 fund balance

scenario 2 - 528,000 fund balance

---------------------------------------------------------------------------------------------------------------------------------------------

scenario 1 wins if you die at 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89

scenario 2 wins if you die at 91, 92, 93, 94, 95, 96, 97, 98, 99, 100...

only 4ish percent of people make it to their 90's

place your bet
 

Silver

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#16
Can you juice your SS checks by paying in more your last few years before retirement? In other words, if your check is going to be minimal, can you make it maximum by paying in more in your 60's?
 

EO 11110

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#17
Can you juice your SS checks by paying in more your last few years before retirement? In other words, if your check is going to be minimal, can you make it maximum by paying in more in your 60's?
think the calculation takes your highest 35 years of earnings. so if you are replacing zeroes, it should help
 

Silver

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#18
think the calculation takes your highest 35 years of earnings. so if you are replacing zeroes, it should help
Aren't your earlier contributions inflation adjusted in the calculation?
 

Goldhedge

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#20
I waited till 66, full retirement bennies and I get all cola increases. My understanding is if you take it before full retirement age...66/67, that is what you will get and no more.
me too...
 

Silver

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#21
yes. but zeroes are not.
That's not very nice welfare if zero's don't count.

I've gone to a lot of trouble pay as little employment tax as possible by having investment income and tax free capital gains. But I'm willing to pay more before retirement to make the youth pay me later.
 

Hystckndle

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#22
what the propaganda piece is doing is trying to persuade you to die before getting a penny back. let's check the math using their example -

"According to United Income, someone who’d get a $725 monthly Social Security benefit by starting to claim at 62 (the earliest age) would see a benefit increase to $1,280 by delaying to age 70 — an increase of 177%."

-----------------------------------------------------------------------------------------------------

scenario 1 - take the 725 at 62 years old. put the 725 into a conservative investment that pays 5% - like a bond heavy balanced fund. by the time you reach 70 you will have $85,000 saved and continue to receive the 725 every month

scenario 2 - when you reach 70 you have zero dollars saved and begin receiving 1,280 per month. you invest your 1,280 into the same 5% investment

at age 70 - scenario 1 is a blowout winner. 85,000 to 0

===============================================================================

fast forward 10 years to age 80 -

scenario 1 - balance in the fund is now $254,000

scenario 2 - balance in the fund is now $199,000

at age 80 - scenario 1 is a blowout winner, up by 55,000

----------------------------------------------------------------------------------------------------------------------------------------

fast forward 10 years to age 90 -

scenario 1 - 531,000 fund balance

scenario 2 - 528,000 fund balance

---------------------------------------------------------------------------------------------------------------------------------------------

scenario 1 wins if you die at 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89

scenario 2 wins if you die at 91, 92, 93, 94, 95, 96, 97, 98, 99, 100...

only 4ish percent of people make it to their 90's

place your bet

Yes, math, the great equalizer.
All if you do NOT use it for living expenses
OR
Work and get penalized for working against the payout.

Note : I am missing the part where 725 to 1280 is a 177% dif
Unless it is their total math.
Regardless,
big casino at best it is.
 

GOLDBRIX

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#24
What the guy is saying is 1280 is 1.76555 times the amount of 725. He is lying because he rounded up.
Personally, I grabbed what I could when I could. My heritage runs the gammot of long lifes and short lifes. Both my parents were gone in their 60s. YMMV
 

Silver

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#25
Personally, I grabbed what I could when I could. My heritage runs the gammot of long lifes and short lifes. Both my parents were gone in their 60s. YMMV
Probably everybody's heritage consists of long and short lives - one grandparent worked his entire life and retired at 65, his died 6 months later on the golf course of a heart attack. My dad is 94 and retired at 55, started collecting SS at 65 - been retired longer than he worked.
 

GOLDBRIX

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#26

tigerwillow1

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#27
The obvious decision factor is how long you expect to live vs. what the breakeven age is for taking SS early or late. When the crazy, complicated SS taxation comes into play, there are more things to consider. For instance, say you have a traditional IRA and about the time you're thinking of when to take SS, you also realize that the RMDs are coming and you want to make Roth conversions. Delaying the SS payout could end up saving a bunch of tax money. If you have savings bonds maturing while you're receiving SS, that runs up the taxes. If you're working, that has an impact. For somebody who is 62 and needs the money to live on, it's an easy decision. For somebody who is able to wait, the best decision is often complicated as heck.

Increasing your Social Security benefit by 177%
Is an ignorant statement that sheds suspicion on the whole article. The increase is 77%. (Agreed that 177% is close enough for common core math).
 

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#28
The "retire early" decision best starts with: first, are you willing to keep working for a few more years; and second, if you earn enough to make the SS payments look like peanuts (which isn't probably that much).

Once you reach the point where your income no longer deducts from your SS payments (if you are willing to keep working in your early 60's) then the "how long am I going to live" question comes into play.

I think for most people, since working forever is probably in their future (because SS doesn't pay for squat anymore), the FRA is likely the choice they'll make.

People that don't have much family that needs help, don't ever get sick and can live very frugal may find SS to be enough and that would then change their decision making process.
 

Scorpio

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#30
you old farts wear me the hell out............

I've fallen and I can't get up,
my back hurts,
don't take my welfare away,

I need air,
I need food,
I need a place to bed down,
I need teeth,
I need a bath (that is fo' sho)



Good gosh man it never ends,

Constantly extracting from the productive like me :0)

Why ya'll so scared to go on your way and be judged proper?
 

FunnyMoney

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#31
...Constantly extracting from the productive like me :0)

Why ya'll so scared to go on your way and be judged proper?
I didn't think we were afraid to "go on our way" but now that you mentioned the "judged proper" part, I'm starting to re-think that.

Also, it was a line item on the tribute form. They told us they were going to save it for us, and according to the constitution's definition that would be in gold, instead they stole it and now give us greatly depreciated paper. Do we really believe seniors can live on a thousand FRNs a month or even less?

We've paid pretty much half of everything we produced throughout our lives in tribute already. When they created the income tax they had us sign an agreement. I guess I signed at birth and got my SS card. I held up my side of the agreement. They haven't.
 

the_shootist

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#32
I'm at 100% at age 66 (Late 2020). It's on that day that I'll begin collecting SS. Not a day earlier, not a day later! I'll take whatever I can get for as long as I can get it! It's an equal part of my multi faceted retirement plan, I'll take what it gives me until the tap runs dry then I'll adjust.
 
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Pyramid

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#34
Two Important facts about SS when it was signed into law by FDR in 1935:

1. The retirement age to collect SS benefits at the time the SS program was signed into law was age 65.
2. The life expectancy at the time the SS program was signed into law was 58 for men, 62 for women.

Thus, most people were never intended to collect SS benefits that they were forcefully coerced into paying to the system from their paychecks. It was indeed a tax to nowhere for most that they would probably never see another dime of.

Good luck out there folks.
 

hammerhead

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#35
you old farts wear me the hell out............

I've fallen and I can't get up,
my back hurts,
don't take my welfare away,

I need air,
I need food,
I need a place to bed down,
I need teeth,
I need a bath (that is fo' sho)



Good gosh man it never ends,

Constantly extracting from the productive like me :0)

Why ya'll so scared to go on your way and be judged proper?
My meds. You forgot my meds.
 

Silver

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#37
Two Important facts about SS when it was signed into law by FDR in 1935:

1. The retirement age to collect SS benefits at the time the SS program was signed into law was age 65.
2. The life expectancy at the time the SS program was signed into law was 58 for men, 62 for women.

Thus, most people were never intended to collect SS benefits that they were forcefully coerced into paying to the system from their paychecks. It was indeed a tax to nowhere for most that they would probably never see another dime of.

Good luck out there folks.
The 1st recipients paid in zero and got benefits. If it was a trust fund, it would have been based on contributions from the beginning. SS led to the breakup of the extended family - once grandma and grandpa had the cash during the depression and nobody else, they moved out.
 

GOLDBRIX

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#38
Two Important facts about SS when it was signed into law by FDR in 1935:

1. The retirement age to collect SS benefits at the time the SS program was signed into law was age 65.
2. The life expectancy at the time the SS program was signed into law was 58 for men, 62 for women.

Thus, most people were never intended to collect SS benefits that they were forcefully coerced into paying to the system from their paychecks. It was indeed a tax to nowhere for most that they would probably never see another dime of.

Good luck out there folks.
The entire basis of what is called a "PONZIE SCHEME".
Those in first get the most out. Last ones in end up holding the empty bag.
Pretty much the way the .gov controllers claim the fund sits today. "Almost Nothing Left" .
 

the_shootist

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#39
Gonna hang in. I like my job and the paycheck. Only 58.
Makes sense, that's what I did. I socked away more wealth, and in instruments only I control (i.e. not counting SS and 401K, IRAs etc.), the last 6 years than in the previous 20. Now's the time to sock it away, while you're raking it in!
 
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