Update: The free Open Social Security tool has been updated to include a new “heat map” visualization that illustrates the relative values of claiming Social Security at different ages. Details here. Here is a sample graph for a couple with similar income histories and the same age:
For this situation, we see that the worst expected outcomes would occur if both individuals claimed really early. The best expected outcomes occur when one claims relatively early and the other claims relatively late.
Original post:
When to start claiming Social Security to maximize your potential benefit can be a complicated question, especially for couples. There are multiple paid services that will run the numbers for you, including Social Security Solutions (aka SS Analyzer) and Maximize My Social Security, which cost between $20 and $250 depending on included features.
Mike Piper of Oblivious Investor has created a free, open-source calculator called Open Social Security. To use the calculator, you will need to your Primary Insurance Amount (PIA). This amount depends on your future income, so I would first consult this other free Social Security benefit estimator tool to more easily estimate your PIA. I believe the value you see at SSA.gov assumes that you will keep working at your historical average income until your claiming age (which won’t be the case for us).
Here are our results as a couple, assuming we were the same age (we are close) and with my expected benefit being slightly higher than hers:
The strategy that maximizes the total dollars you can be expected to spend over your lifetimes is as follows:
You file for your retirement benefit to begin 12/2047, at age 70 and 0 months.
Your spouse files for his/her retirement benefit to begin 4/2040, at age 62 and 4 months.The present value of this proposed solution would be $657,749.
Basically, the tool says that my wife should apply as soon as possible, while I should claim as late as possible. I believe this is because this scenario allows us claim at least some income starting from 62, and if I die first after that, my wife would still be able to “upgrade” to my higher benefit.
The tool might take some time to run the calculations, depending on your browser. You can learn more and provide feedback at Bogleheads and Github.
I am not a Social Security expert, and am not qualified to speak to the accuracy of the results. However, Mr. Piper is the author of the highly-rated book Social Security Made Simple, has a history of doing thorough work, and the tool has been around a while now. If I were close to 62, I would probably also use the paid services for a second and third opinion. Why? Spending $100 now could save you many thousands in the future.
The best thing about this free tool is that it can introduce a lot of people to ideas that they would have not otherwise considered. Even if it lacks every bell or whistle, being free means it can help more people. Many spouses wouldn’t think of having one claim as early as possible (age 62), and then have the other claim as late as possible (age 70). It’s not common sense unless you understand the inner workings of Social Security.
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I had seen this calculator posted on another site a few weeks back. This tool is VERY primitive and doesn’t work in many situations, specifically mine. Issues people should be aware of:
1) If doesn’t take into account spousal benefit if the spousal benefit is more then their direct earnings. In my case, my wife’s 50% claim on my earnings will be a LOT higher then her direct earning benefits but there is no way to note that on the form. It just assumes each partner has their own direct earnings when you enter the estimated payment.
2) It suggested my wife take her payments at 62 and me at 70, but file and suspend is no longer option for someone my age when using a spousal benefit, so that scenario won’t work when doing a spousal claim. It should know based on age entered what options are valid and let me note about spousal benefit claim vs direct earnings.
3) The “Test an alternative claiming strategy” option doesn’t work. If I manually adjust my claim date to when I will be 67 years old (my full retirement age, for my current age) and click submit, nothing happens.
I applaud the open development of tools like this, I regularly use FireCalc and ORP Retirement Planner, but there is something to be said for having access to and trusting professionally developed tools for something as important as optimizing your social security claim or planning how you balance 401k/IRA/Taxable Account withdrawals during retirement to minimize taxes, deal with RMD’s, etc. Spending $100 on a professional Social Security Tool or optimal withdrawal plan tool could net you $1000’s in savings over your life time, a pretty good ROI.
A wise man once said… “Tell me your PIA and the day you are going to die and I will tell you the optimal time to claim Social Security.” 🙂
I thought the Open Social Security tool was brilliant! This is an area that I feel ignorant so it’s great to have a place to start.
I let it calculate the best scenario and then used the alternative strategy to calculate what I’d tentatively planned. It calculated a difference of less than $2k between the two. Given the risk mitigation (something tough to quantify), my tentative plan might be the best for us.
At one point Social Security Solutions, Inc offered the use of their tool free to veterans (on Veterans Day). I used the tool that day to run my estimates. They might still do that.
Also, while the SSA website has the benefit estimator to calculate PIA, there is another tool (ANY PIA) available for download on their website that provides a more detailed estimate based on actual (and projected) earnings. It also uses the various arcane rules that SSA has that may not be apparent in the estimator.
I did not have any issues with the calculator and it confirmed what my plan was the best, assuming we live past 75. I have spoken with the author as well and he seems knowledgeable.