kastnna wrote:
- quote -

Sorry Skip, this is somewhat OT, but it could have a big effect on
financial planning so I think the story needs to get out.

Would you believe someone has actually applied for a patent for a
process to analyze when to take Social Security benefits?

Think of that! Alongside tax-strategy patents these seem to really go
overboard. I think these are setting bad precedents that could deprive
consumers of the ability to get answers to common benefits and tax
questions. If the patent is granted, you'd need to pay a licensing fee
to do an analysis for a client that was deemed to be "infringing" the
method covered by the patent. Not just planners -- imagine a web site,
like Fidelity's, or Yahoo, or heck the SSA, that tries to put up
planning pages where you can input some assuptions -- it seems a patent
could limit the scope of that.

I'm no patent lawyer but the claims seem to read broadly. It discusses
postponing SS, and getting temporary income (they call it "income
bridge") from annuities, CDs, mutual funds, and on and on - basically
everything but "getting a paper route" - and optimizing the after-tax
value of all of this. If granted, I wonder how far it could be used
against others attempting to help retirees answer this question.

The patent summary is below, the full thing is available on the
uspto.gov site. Mahaney is with Prudential Financial. How do I know
about this? He sent me junk mail and the brochure talked about a "patent
applied for" process and after I fell out of my chair, I went to the
uspto web site and looked it up. I also found out that yes, it's way too
late to file an opposition.

-Tad

United States Patent Application 20050177509
Kind Code A1
Mahaney, James I. ; et al. August 11, 2005
Method for maximizing retirement income using financial bridge products
and deferred social security income

Abstract

The present invention provides a method for maximizing retirement income
using bridge annuities and deferred Social Security income. Financial
information about a client is gathered, in addition to financial
information about the client's spouse, if applicable. A variety of
income scenarios are modeled using the financial information and a
plurality of income models, each model including income from a bridge
product and deferred Social Security income. Alternate funding
approaches are projected using the financial information, and the
modeled scenarios are compared to the alternate funding approaches to
determine the optimal scenario for maximizing retirement income. The
client can then purchase a bridge product in accordance with the optimal
scenario.

<darkness39[at]yahoo.com> wrote in message
news:1171442157.978656.274580[at]a34g2000cwb.googlegroups.com...
- quote -

I have considered this scenario. My Normal Retirement Age is 66. It is
entirely possible I may not defer taking benefits quite that long. The
calculators at the SSA website are very good, and I used one to forecast my
benefit at 6 month intervals, whereas the very good annual report gives you
either age 62 or full retirement. I liked being able to see the interim - or
longer.

Elizabeth Richardson

On Feb 12, 6:58 pm, "Elizabeth Richardson" <erich...[at]worldnet.att.netwrote:

- quote -

Thank you for the clarification and sorry to pry into your personal
life!

My own strategy in pondering uncertainty is to 'minimise regret'.
Regret as an emotion in life.

My observations about regret are:

- in the short run we regret the things we did do, that went wrong
- in the long run, we regret most the things we never did do

Long term regret is of course far more important to me than short term
regret-- I live in the long term!

So I try to have fun (aka spend money) as I go along, but always with
an eye to value for money. I try to defer gratification when prudent,
but not to live a life wholly of denial.

In the case of your SS benefits, this may mean you wish to start
taking them, if not at 65, perhaps at 64. Your total benefits will be
less (depending on the crossover point) but this might give you more
options to enjoy life whilst you are healthy.

Conversely, you have deferred gratification by a couple of years over
taking it at say, 62. So you have not entirely robbed Peter to pay
Paul. Whichever way it goes, one will be somewhat wrong, but not
wholly so.

<darkness39[at]yahoo.com> wrote in message
news:1171303127.675548.186780[at]a34g2000cwb.googlegroups.com...
- quote -

Well, yes, my husband is much younger - 9 years. So, if I live to be 95 and
he lives to be 85, I'm a widow for only a year; only 6 years if he dies at
80. I don't think that's long enough to make up the difference in my taking
benefits early. And, there's enough of an age difference, there's every bit
of a chance I'll go first. Also, the difference in our benefits isn't very
much, although, admittedly, his will be a bit higher.

Elizabeth Richardson

On Feb 12, 4:29 pm, "Elizabeth Richardson" <erich...[at]worldnet.att.netwrote:

r?
- quote -

Ah, I should have saved the reference. A couple of economists studied
optimal social security strategy for actuarially average people.
Results (as best I recall): men should start at age 62 (if their
earned
income allows); single women should wait until full retirement age;
married women should start at 62 because the reduced benefits don't
last forever -- only until their husband dies!

Darkness again:

This was the source of my confusion about your strategy. The
implication is, unless your husband is much younger, that you probably
maximise your returns from SS by collecting it early-- when he dies,
your SS income will rise to his level in any case.

I am, personally, all for delaying gratification in life as long as
possible, eg by taking SS later. But balanced against this is the
loss of savings, which are your own and can be passed on to your
estate.

On Feb 12, 4:29 pm, "Elizabeth Richardson" <erich...[at]worldnet.att.netwrote:
- quote -

Elizabeth

I think the advice here is the reverse?

As a married woman, you only get the higher SS benefit *until your
husband dies*?

(question, not assertion)
In which case, you want to maximise the time period you draw the
higher benefit level?

I stress I am no expert on this, just what I read/ inferred here.

Not wishing to be harsh, men (speaking as one), have a terrible record
for just dying a lot earlier than their female partners. I can think
of endless cases in my family where the women have lived into their
90s, and the men have died in their early to mid 70s. Testosterone
seems to wreck an awful toll both in heart disease and cancer. So I
wouldn't assume, if you are long lived, that you are not likely to be
a widow even if your partner is some years younger.

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message

- quote -

I stated elsewhere in this thread that I intend to start taking my benefit
later this year when I turn 62, choosing to not spend my IRA. However, this
position from Skip, Scott Burns, Alicia Munnell, has made me rethink my
position. The women in my family (on both sides) tend to live a very long
time, and I've no reason to think I will be an exception. The decision
about my husband's SS benefit is several years hence, but my sense is that
we may wait a bit for his benefit, too. I doubt I will be a widow, or at
least not for long, but it still makes sense for us to maximize his benefit,
too.

Thanks, kastna, for starting this thread. It has been very informative.

Elizabeth Richardson

On Feb 9, 8:09 pm, "Gil Faver" <rowdy'sb...[at]xxyz.com> wrote:
- quote -

*sticking to financial planning*

solutions have already been mooted, and the President has signalled
these might be acceptable to him, along the lines of making more
income SS taxable.

If it is acceptable to GWB, then it will be acceptable to almost any
future president, regardless of political stripe.

In terms of retired people, it's a fair bet that more benefit will
become taxable-- that would seem a simple way of increasing the
funding abililty of the system. They are less likely to be affected
by future increases in retirement age.

I highly recommend Alicia Munnell's pieces at

http://www2.bc.edu/~munnell/publications.shtml

particularly

http://www.bc.edu/centers/crr/ib_46.shtml

http://www.bc.edu/centers/crr/ib_30.shtml

http://www.bc.edu/centers/crr/jtf_16.shtml

http://www.bc.edu/centers/crr/ib_25.shtml

Note she is politically seen as a 'liberal' and a 'democrat' but I
think her analysis is very clear and cogent.

On Feb 10, 12:01 pm, "HW \"Skip\" Weldon"
<skip5700removet...[at]hotmail.com> wrote:
- quote -

Put it another way, longevity risk is a big factor.

Given the progress of medical science, it's quite possible we will
live a lot longer than our parents. 70 was once a normalish age to
die, and yet now I seem to be surrounded with relatives who are
pushing 100.

SS is the only pure hedge against longevity (other than being very
wealthy).

My own sense of the benefits debate is this:

- taxes will rise eg by increasing the 'cap' against which SS taxes
are payable (President Bush has already sent signals along these
lines)
- benefits will be cut by increasing the amount of SS income which is
taxable
- benefits will be cut by increasing the retirement age over time
beyond 67
- the payroll tax may be increased at some point (much more
politically contentious, would require a compromise on something else
eg private accounts)

Each of these solutions is politically possible, improves the
financial position of the SS system (the second by increasing the
income of the US Federal government as a whole, which can be used to
repay SS treasury debt), and doesn't require an obvious grab from
people whose only or main source of income is SS.

By contrast I expect COLA indexation to stay, and benefits for current
recipients to be otherwise unchanged.

Ah, I should have saved the reference. A couple of economists studied
optimal social security strategy for actuarially average people.
Results (as best I recall): men should start at age 62 (if their earned
income allows); single women should wait until full retirement age;
married women should start at 62 because the reduced benefits don't
last forever -- only until their husband dies!

You can see the logic: the actuarially average man dies young relative
to the AA woman, the AA married woman has benefits less than those of
her spouse, and so on.

The difficulty is of course that specific cases differ greatly.
Do you earn so much that in effect you must wait until full
retirement age to take SS? Did your parents live forever and
are you in good health, so that you expect to recoup the cost
of waiting till full retirement age or later? And of course
it helps if you don't need the money and so are free to optimize.

David

In article <B5-dnUB-WeFauFLYnZ2dnUVZ_rqhnZ2d[at]comcast.com> ,
"Cal" <cal-lester[at]comcast.net> wrote:

- quote -

To add one other reason to my decision: my IRA becomes part of my
estate, SS payments end at death. The less I need to take out of my IRA
means the more I can leave to my wife, should she outlive me, and
children.

--
-Ernie-

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote
- quote -

Joe and you are both right, AFAIC.

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:YTHzh.344$tD2.60[at]newsread1.news.pas.earthlink.net...
- quote -

The minutiae becomes very important for those nearing 62 and needing to make
this decision. The planning minutiae of those in the accumulation phase,
like you are, is almost irrelevant for those already in retirement. The
spectrum of readers and subjects in this forum is wide, as it should be.

Elizabeth Richardson

Elle wrote:

- quote -

I'd agree with you, Elle, but this is how many topics here seems to
gravitate. In our 40's, it's starting to seem irresponsible to put any
number for SS in my retirement budget, but at 62 when the OP's client(s)
are asking about a decision they need to make, at least the numbers are
far less fuzzy. Scott (Burns) can give his view along with the numbers,
and Cal (here) who, having been in the insurance industry actually
carries more clout for me on this issue, has a different response.

I think this is the nature of money, and forecasting.
JOE

<redmonds[at]sprynet.com> wrote
- quote -

To me, fundamentally, it's gravy. E.g. baby needs a new pair
of ski boots. At least I hope I'm still skiing in my 60s...
Another argument for good health now. :-)

Little aside: I continue to really profane a lot of the
minutiae of analyses like this. It's simply not warranted,
given the variability of conditions for those a long way
from being 62. Big picture planning is a good idea, for
sure.

Love those annual reports from the Social Security bureau,
yada, these days, though.

On Sun, 11 Feb 2007 09:19:48 -0600, "Elle"
<honda.lioness[at]nospam.earthlink.net> wrote:


- quote -

Another dimension to this discussion is that the debate can be about
risk management rather than "payoff." The point is that delaying SS
is a method to purchase longevity insurance. This may or may not be
worth the cost. One situation to think about for some people is the
combination of a non-COLA pension and SS. Delaying SS may be a better
life long strategy for managing the risk of lost purchasing power of
the pension as time and inflation accumulate. Many other scenarios
can be imagined.

I think the bottom line is that ya pays yer money and ya takes yer
choice, but the context is larger than just investment payoff.
Remember SS is fundamentally an insurance program not an investment.

"Cal" <cal-lester[at]comcast.net> wrote
Ernie wrote
- quote -

Makes sense to me. I see E. Richardson's posts here comments
similarly about not working so hard and saving so much for
one's much older years, when one, for health reasons
probably, is less likely to be able to enjoy spending the
money. Helps me justify my big bucks spending for dental
services, simultaneous to weekly ski outings, too, lately.
Ya only live once. :-)

Though gosh knows what will happen to Social Security by the
time I am eligible for withdrawals. (I being 40-something.)

On Fri, 9 Feb 2007 11:34:34 -0600, "kastnna" <kastnna[at]auburnalum.orgwrote:

- quote -


I don't believe there is a "one size fits all" answer.

I did some calculations for myself (wife is six years younger) -- and I
don't recall all the details now, but if I lived into my 80's I'd get more
SS money over my lifetime by deferring. My dad died in his late 80's and
mom is going strong at 87

However, in order to defer I'd have to be withdrawing money from my IRA's.
I have both Roth and conventional. Once I took my target earnings for
those funds into account, it made much more financial sense to take the
money early. So I started at 62.

For others, it may not make as much sense, depending on the source of
alternate funds (if needed), and their health status, expected longevity,
etc.
--ron

- quote -

My feelings exactly. AND I am doing it NOW....
Cal Lester CLU

In article <sJ-dnUC0IuaJ5lPYnZ2dnUVZ_rCsnZ2d[at]comcast.com> ,
joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -

If I read the article right, he puts the break even point at 14 years
which is right about where I figured it. Of course to gain any benefit
from deferring, one must live that long. In theory he is correct in the
long term, but when I made my decision I figured having the extra money
now from SS and not having to touch my IRA would allow me to spend the
extra money while I am still young enough to enjoy it rather than have
more money later when I would be too old to enjoy it, if I should live
that long. (All assuming that SS will still exist as we know it 14
years from now).

--
-Ernie-