(USA topic) The grim psychology of deciding on when to take social security benefits

[JimGant]

This Forbes article explains a pro-rata "gotcha":

http://www.forbes.com/sites/kotlikoff/2014/12/31/social-security-qa-are-delayed-retirement-credits-factored-annually-or-pro-rated-monthly/#d06557569af5

Not sure this fits your situation. In fact, not too sure what he really is saying without some numeric examples -- do you get a catch-up check the following January for all the months foregone? Or what?

[SpokaneAl]

That is an interesting, confusing article. It kind of sounds like the example the writer is providing is of a person starting, then stopping benefits, but I could be wrong.

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[taxout]

Yes, that's precisely the issue.

If you delay taking Social Security after your "normal" retirement age, you get an adjustment based on the number of months that have elapsed since your normal retirement age.

But Social Security only counts the elapsed months up to the end of the PREVIOUS year, not including the months elapsed in the year you start benefits.

Here's the rule in Social Security-ese:

"If you are full retirement age or older and eligible for old-age benefits but do not apply for benefits, your delayed retirement credits for months from the month of attainment of full retirement age through the end of the year prior to the year of filing will be included in the computation of your initial benefit amount. Credits earned in the year you attain age 70 will be added in the month you attain age 70."

https://www.law.cornell.edu/cfr/text/20/404.313

You'll note that this special rule does not apply at age 70 -- you do get credit for the elapsed months in the year you turn 70, if you wait that long to take Social Security. All of this pretty much matches with the numbers I'm getting from Social Security, including the fact that the shortfall is gone if I wait till age 70.

As that article says, there are plenty of gotchas hidden in the Social Security rules.

[SpokaneAl]

It becomes more confusing as I read. This Social Security site calculates that if I wait 12 months from my normal retirement date (September 2016), in September 2017 I will receive 108%, which is absolutely the correct number. https://www.ssa.gov/OACT/quickcalc/early_late.html

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[taxout]

You didn't note the gotcha on that page:

"If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start benefits. The calculator below gives you the amount with all credits applied for comparison purposes."

This seems to suggest that the shortfall I'm getting and which is apparently produced by the rule I cited, will be eliminated the following January. But I can't find the rule that states that. My calculations with the shortfall come from:

https://secure.ssa.gov/acu/ACU_KBA/main.jsp?URL=/apps8z/ARPI/main.jsp?locale=en&LVL=4

[SpokaneAl]

It does sound like this is a temporary, admin issue that will be rectified the following January. I sent SS an email asking the question and will hopeful for a response, which I will post.

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[JimGant]

Another interesting wrinkle to deferring until age 70:

If you aren’t a widower or a divorcée, whose marriage lasted a decade or more, you should A) file​ at full retirement age​ for your own retirement benefit, but suspend its collection, and ​ wait until 70 to restart your retirement benefit. This filing and suspending won’t change your age-70 benefit, but it will give you the option of requesting a lump-sum payment of all suspended benefits if you ever decide you need a chunk of money for an emergency. Note, though, that if you take your suspended benefits in a lump sum, your retirement benefit will revert to its full retirement value; in other words, it will no longer include your delayed retirement credits.

http://www.pbs.org/newshour/making-sense/how-social-security-should-guide-when-you-marry-a-younger-partner/