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I thought figuring out when to claim Social Security would be one of the more complicated decisions we’d have to make in retirement.
I was wrong.
In less than 15 minutes, we now have a strategy.
My wife will start her Social Security at 63 years of age, and I’ll start mine at age 70. My wife will claim her spousal benefits at age 69 years, 11 months.
And just like that, we have a plan.
Today, I’ll share the tool I used to get our results.
If you’re struggling with determining when to claim social security, today’s post is for you.I thought figuring out when to claim Social Security would be hard. I was wrong. I just figured it out in 15 minutes. Here's how... Click To Tweet
How To Determine When To Claim Social Security
When I first started thinking about Social Security, I over-simplified things.
For my article titled Should You Take Social Security At Age 62 or 70, I did the math and determined it was in my best interest to delay claiming Social Security at Age 70, with a break-even age of 84-85. If summary, if I lived longer than my mid-80s, I’d get more in SS by delaying. I encourage you to read that post for my analysis.
But…I made a mistake.
I did a lot more work than I had to, and I still missed a hugely important factor in my analysis.
In fairness, I wrote that post way back in 2017, years before I had to sharpen my pencil for my final decision on when to claim social security. But still, I should have recognized a critical factor, yet I completely omitted it from my analysis.
That factor? How to optimize spousal benefits…
The Importance of Spousal Benefits
It wasn’t until I read Wade Pfau’s excellent book, Retirement Planning Guidebook (affiliate link), and wrote this review that I realized the importance and complexity of spousal benefits. As I cited in that book review:
“I’ve been of the somewhat simplified opinion that I’ll defer until Age 70 to take advantage of the risk-free ~8% annual increase in the payout rate. What I missed in my article, however, was the impact (and complexity) of spousal benefits, especially where one spouse earned significantly less than the other.”
Fortunately, Dr. Pfau suggested some social security calculators in his book, which I mentioned in the book review and ultimately led to today’s post:
“When Wade says this is a decision you can not make without using a detailed SS Calculator to analyze your decision, I listen. I’ve saved those links, and plan on doing a more detailed analysis in the coming years.“
Now I’ve Done It.
I’ve taken Dr. Pfau’s advice and I’ve done the “more detailed analysis” using the Open Social Security calculator recommended in the book. I even went a step further and contacted the calculator’s developer, Mike Piper, CPA, explained I was writing this post and asked if he’d be willing to answer any questions I have as I work through his model.
Fortunately for all of us, Mike said yes.Today, we're doing a deep dive into the Open Social Security calculator, with Q&A from the developer, Mike Piper, CPA. Click To Tweet
The Open Social Security Calculator – A Review
The Bottom Line: If you’re trying to figure out when to claim social security, I highly recommend spending 15 minutes with The Open Social Security Calculator. It takes all of the complexity out of the topic and tells you, in very simple terms, when both you and your spouse should file for social security to maximize your lifetime returns.
By following 3 simple steps, you’ll have a strategy. I know, because I just did it (and will be sharing screenshots with my actual results below).
Here are the three steps:
- First, you must create (or log into) your mySocialSecurity account.
- Second, you enter your data from that site into the calculator.
- Finally, you hit “Submit” and get a clear recommendation on when to claim social security.
Interested in learning more?
Read on…below I share our actual results and screenshots from the calculator. I also share my exchange with Mike to offer you more insight into how his calculator works.
Before I go there, here’s a bit of background on Mike Piper, the developer of the model, in his own words:
Q: Mike, what’s your background, and how did you develop your expertise regarding Social Security claiming strategies? What lead to your creation of the calculator?
A: I’m a CPA who focuses on retirement planning. I first really began to develop an expertise in Social Security when researching and writing the first edition of my book, Social Security Made Simple (affiliate link) back in 2011-2012. (The 2022 edition is the 7th edition of the book.) And over the decade since, I’ve been fielding questions regularly from readers and clients about Social Security rules and planning.
Entering Your Data Into Open Social Security
I was impressed with the simplicity of the model. Once you click on the site, you’re asked to enter some basic information, as shown below. Note, you’ll need your “PIA” (Primary Insurance Amount) from the mySocialSecurity site, which is simply the benefit you’ll receive if you file at your Full Retirement Age.
Following is the data I entered, which took me ~1 minute to input (birthday’s omitted for the purpose of this post):
The Recommended Social Security Claiming Strategy:
Simply click on the “submit” button, and you’ll be given the following personalized strategy:
As you can see above, the model quickly made the recommendation which I summarized in the opening of this post, but I’m sharing it again below so you can see the summary:
My wife will start her Social Security at 62 years and 8 months of age, and I’ll start mine at age 70 years and 0 months. My wife will claim her spousal benefits at age 69 years, 11 months.
It doesn’t get much easier than that, and it took me less than 15 minutes for the entire process.
But wait…there’s more.
Social Security Payout By Year
The model presents a clear summary of how much social security you can expect per year, including the breakdown of each spouse’s social security benefits. It also provides a nice summary at the bottom of the table of what happens if either spouse dies first:
Testing Alternative Claiming Strategies
The model presents a graphic that shows the reduction from optimal for any other scenario you may be interested in. Simply click anywhere on the graphic and the calculator will run the numbers for your payouts, including a Net Present Value calculation that you can compare to the recommended strategy.
Alternative Scenario: Claiming At Full Retirement Age (67)
In my case, I wanted to run a scenario where I started my payouts (and my wife started her spousal benefit) at my full retirement age of 67. Given the wide gap between my wife’s benefit and mine, I wanted to understand the impact if I started my SS at age 67, which would allow my wife to claim her spousal benefit 3 years earlier than the recommended strategy. A few clicks, and I was able to see the impact by year:
Comparing The Alteratives Graphically
I’ve always liked graphs, so I plugged the two scenarios (Age 70 in blue vs. Age 67 in red) into a spreadsheet and built the following chart. The lines represent total annual social security for our household, and both scenarios assume one of us dies at age 90 (with the benefit dropping to the survivor benefit figure):
As you can see, our SS increases earlier if we claim at age 67 (red line), but never achieves the higher annual income we’d achieve if we wait until age 70. Also, the survivor benefit is lower in the scenario where we claim at age 67 instead of waiting until age 70. In both scenarios, we see some income starting when my wife claims her SS benefit at age 63.
Looking at the model’s “Net Present Value” (NPV) comparison between the two scenarios, you’ll find we lose a total of $35,724 in value if we claim at age 67 vs. age 70:
- Age 70 NPV: $1,026,363
- Age 67 NPV: $ 990,639 (3.5% below the optimal strategy of delaying until age 70)
Steps To Finalize Our Strategy
Based on the output of the model, I’m confident that I won’t be making any decisions for at least 8 more years (I’m currently 59 years old). I’ll explore more models and continue to educate myself on the topic, but at least I know where things are heading as I continue to learn about social security claiming strategies. There are also other factors I’ll continue to evaluate, including:
- the benefit of having more time to do our annual Roth conversions,
- monitoring the annual performance of our portfolio (to fund the delay period),
- evaluating annuities, and other options to provide a longevity hedge,
- monitoring inflation and the best options to provide a hedge.
Inflation and longevity are the two hedges I consider to be best served by social security, and I’ll be keeping a close eye on them in the coming years. It’s helpful to think about major decisions while we still have plenty of time, and this calculator was useful in this stage of our decision-making process. In many ways, this reminds me of when I started using retirement calculators 5+ years prior to my retirement date, and that’s a useful comparison at this stage for my preliminary work on determining when to claim social security.
Some Questions About The Calculator, And Mike’s Response
If you’ve been paying attention, I’m sure you have some questions about the model. Hopefully, they’re the same as mine, since I was able to send them to Mike to get his responses. Here’s our exchange:
The calculator does let the user adjust the discount rate though, by checking the box at the top of the page for additional options.
If you wouldn’t mind, could you review my summary conclusion and confirm that our recommended course is Option 1 (claim at age 70), as suggested by the model. Are there any other considerations we should factor in before finalizing that as our strategy?
Given the complexity of spousal benefits in optimizing your lifetime social security payout, I agree with Wade Pfau that it’s critical to run your scenario through various calculators before finalizing your decision on when to claim social security. The implications on your lifetime income are significant, and shouldn’t be taken lightly.
Based on my experience, the Open Social Security model is a good calculator for someone without knowledge of the intricacies behind spousal benefit strategies. The result is simple, quantified, and customized to your situation. I’ll plan on running a few more calculators in the coming years, keep an eye out for future posts.
Also, if you’d like another perspective on how a blogger I admire is approaching his decision on when to claim social security, I recommend reading ESI’s article A Social Security Seminar and Our Current Plans. If you’d like to dig deeper on the topic, below are two relevant articles from Kiplinger:
- 12 Things You Must Know to Maximize Your Social Security Benefits
- When You Claim Social Security Can Have Huge Implications For Your Spouse.
Finally, a HUGE shout-out to Mike Piper for all of his help as I work through this puzzle. He’s been responsive to every question, and this writer greatly appreciates his help. Following are contact points for Mike, I’d encourage any of you with questions to check out his excellent work:
Your Turn: Have you finalized your social security claiming decision? Did you use a calculator, or take a different approach? Let’s chat in the comments…