[1]https://www.congress.gov/bill/114th-congress/house-bill/1314/text#toc-HB0761134CD9140EF87627EA34FDDB1E1, H.R. 1314 – Bipartisan Budget Act of 2015, Section 831, Closure of Unintended Loopholes. The new laws change two aspects of Social Security claiming; the restricted application and the voluntary suspension of benefits (often referred to as “file and suspend”).
[2] https://www.ssa.gov/OACT/FACTS/
[3] http://www.ssa.gov/oact/cola/colaseries.html
[4]https://www.ssa.gov/news/press/basicfact.html, Social Security Basic Facts, October 13, 2015
[5] In Table 1-2 and all tables that show potential future savings’ balances, it is assumed withdrawals occur at the beginning of the year, then the rate of return is applied, and the end of year balance is what is shown.
[6] Because of the Social Security rounding rules, if you try to replicate the calculations and apply a 2% increase on your own, you may not get exactly the same answer.
[7] Sara determined this 7% by increasing the rate of return on her savings in her projections simultaneously for both the early and late claiming scenarios. The return had to be increased to 7% or greater before the projected savings balance (by the end of the year she reached 89) for the early claiming plan surpassed that of the age 70 claiming option.
[8] Many finance folks recommend using a “real” rate of return, which is the return you might expect to earn in excess of inflation. A good proxy for this would be the rate on long-term TIPS (Treasury Inflation Protected Securities). However, since Sara has already inflated her benefit amount and is now taking the present value of that inflated income stream, she should use the nominal rate of return she expects to earn on safe investments. For example if you expected you could earn 1% above inflation, and you expect inflation to be 2%, your real rate of return is 1%, and your nominal rate of return is 3%.
[9] Social Security is also mailing a paper statement to individuals under 60 at 5 year increments, so at age 25, 30, 35, 40, 45, 50, 55, and then each year at age 60 and beyond.
[10] According to the Social Security office “If your birthday is on January 1st, we figure your benefit as if your birthday was in the previous year. If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month.” -Source: http://www.socialsecurity.gov/retire2/agereduction.htm
[11] The Kitces Report, 9/09, by Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™, verification can be found in the Social Security Handbook section 724.1.A
[12] For those born in 1943 or thereafter. For those born prior to 1943, the formula provided a lesser increase for delaying. Data in the Social Security handbook section 720.3.C.
[13] The year you reach FRA, only earnings prior to you reaching FRA count toward this limit. To learn more specifics see How Work Affects Your Benefits, SSA Publication No. 05-10069, ICN 467005, January 2015. You can find it online at http://www.ssa.gov/pubs/10069.html#a0=2.
[14] 2015 Social Security and Medicare Facts, by Joseph F Stenken, J.D. CLU, ChFC® Q. 223 Can a person lose some or all Social Security benefits by working?
[15] http://crr.bc.edu/briefs/when-should-married-men-claim-social-security-benefits/ , by authors Steven A. Sass, Wei Sun, and Anthony Webb, March 2008, Center for Retirement Research at Boston College
[16] If you attain FRA on the first day of the month for Social Security purposes it is as if you attained the age in the prior month. According to the rules someone who attains the age of 66 on 5/1/2016 would technically reach FRA in April 2016 and would be eligible for suspending benefits under the old rules. In addition, one attorney, Avram Sacks, makes an incredibly valid case of interpreting the law to mean that anyone who reaches FRA as late as August 2016 would still be eligible to file and suspend under the old rules. You can read his interpretation here: Alternative Interpretation of Bipartisan Budget Act of 2016.
[17] Technically the law specifies that the new rules regarding suspending benefits begin 180 days after the enactment date of this law which was 11/2/2015. By our and other industry expert calculations that means you could still suspend benefits under the old rules on 4/30/2016 – but as that is a Saturday I have chosen to use the 4/29/2016 date throughout this text. In addition, one attorney, Avram Sacks, makes an incredibly valid case of interpreting the law to mean that anyone who reaches FRA as late as August 2016 would still be eligible to file and suspend under the old rules. You can read his interpretation here: Alternative Interpretation of Bipartisan Budget Act of 2016.
[18] Thomas Jefferson Is Rolling in His Grave -- A Rant on Social Security's Complexity, 8/6/12, Forbes Online
[19] Visit the Retirement Planner: Benefits For Your Spouse section of the Social Security website at https://www.socialsecurity.gov/planners/retire/yourspouse.html if you need references to help you follow your claiming plan.
[20] https://www.ssa.gov/planners/survivors/survivorchartred.html, Social Security Benefit Amounts For the Surviving Spouse By Year Of Birth
[21] I am simplifying the calendar years. Keep in mind the “born 1st of the year” rules; someone born 1/1/1967 is considered to have been born in 1966 for purpose of these rules.
[22] Graph derived from spreadsheet developed by David E. Hultstrom of Financial Architects, LLC, using white collar mortality numbers for Sam/Sara.
[23] http://www.investmentnews.com/article/20120226/REG/302269976 , 2/26/12
[24] The Decision to Delay Social Security Benefits: Theory and Evidency, by John B. Shoven, Sita Nataraj Slavov, NBER Working Paper No. 17866, February 2012
[25] http://crr.bc.edu/briefs/should-you-buy-an-annuity-from-social-security/ , Center for Retirement Research of Boston College, Should You Buy an Annuity From Social Security, May 2012
[26] See Social Security Handbook section 718 Windfall Elimination Provision (WEP)
[27] OLR Research Report, Sept 7, 2006, https://www.cga.ct.gov/2006/rpt/2006-R-0547.htm
[28] Lump sum distributions from plans where earnings were not subject to Social Security are not covered in this section. If you want to dig read Retirement Planning for Workers Impacted by the Windfall Elimination Provision at https://www.onefpa.org/journal/pages/apr15-retirement-planning-for-workers-impacted-by-the-windfall-elimination-provision-.aspx
[29] The cut off numbers ($826 and $4,980) are called “bend points” and they are indexed to inflation.
[30] https://www.socialsecurity.gov/pubs/EN-05-10045.pdf , SSA Publication No. 05-10045 ICN 460275, August 2015
[31] Take Bob’s AIME of $4,525 less the first bend point amount of $826 to get $3,699 that falls into the second bend point formula. 32% of $3,699 is $1,183 (rounded down to the nearest dollar).
[32]George can do this because he reached the age of 62 on or before 1/1/2016. The option to restrict an application to only spousal benefits will not be available for those turning 62 on or after 1/2/2016. In addition, Chris must suspend benefits on or before 4/29/2016. If she were to suspend benefits after this point, then George would not be able to receive a spousal benefit while Chris’s benefit was suspended.
[33] https://apps.irs.gov/app/vita/content/globalmedia/social_security_benefits_worksheet_1040i.pdf , Social Security Benefits Worksheet – Lines 20a and 20b, 2014 Form 1040
[34] I used the online 1040 tax calculator at DinkyTown.net for the 2015 year to calculate the AGI, taxable income and total tax due. Calculator is at: https://www.dinkytown.net/java/Tax1040.html
[35] https://www.ssa.gov/policy/docs/ssb/v62n3/v62n3p51.pdf
[36] https://www.ssa.gov/planners/retire/agereduction.html
[37] I’ll be honest. I don’t know if I have applied the rounding rules accurately to every part of this formula – nor to all the calculations in this book. I have decided it is not material to the outcome.