"rick++" <rick303[at]hotmail.com> wrote:

- quote -


Here is one more way to play the game. According to:

http://finance.yahoo.com/focus-retir...nt-preparation

Quoting the relevant section:

"Let's say Ted and Alice are the same age. He's eligible for a $2,000 benefit at
his full retirement age; she's eligible for $1,000 at hers. Alice claims
benefits based on her earnings at age 62 and gets $750; Ted, meanwhile, is
considering waiting until age 70, to try to maximize their benefits. The problem
is that 70 is a long time to wait to start receiving benefits.

At full retirement age, though, Social Security gives a person two choices: You
can take your own benefit, or -- if eligible -- you can collect just a spousal
benefit, and then claim your own benefit at a later date. Thus, if Ted (at full
retirement age) takes his spousal benefit based on Alice's earnings, Social
Security would award him $500, or half of Alice's projected benefit at her full
retirement age. Then, at some future date, Ted can ask Social Security for
benefits based on his earnings. (At age 70, Ted would qualify for about $2,640 a
month.)"

-- Doug

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- quote -

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

- quote -

With TurboTax or equivalent, this is easy. Without them, it would be a real PIA
for all but the simplest returns.
-- Doug

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- quote -

One of the articles asked the SSA and they said they werent too
worried becaue less than 1% of recipients currently exercise this
option.

I remember another social security "game" about a decade ago
where a number of poor families where coached their children
to act disabled so they could collect SSDI, which is legitimate for
really
disabled kids. Some of the gaming bordered on abuse by parents
denying their kids prescribed meds or prothesetics making their kids
appear more disabled than they were. And the number of kids
collecting
SSDI in certain zipcodes had skyrocketed that period. I dont recall
if
the SSA reacted to this specific game, but SSDI has become more
difficult
overall to obtain.

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Fred J. Tydeman wrote:

- quote -

yes.

-Will

william dot trice at ngc dot com

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On Thu, 21 Feb 2008 22:39:31 UTC, "Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote:

- quote -

Can one do it for all 8 years, or, only a max of 3 years.

If just 3 years, then can one collect SS for ages 62, 63, 64; change their mind.
Then do ages 65, 66, 67, change their mind. Then do ages 68, 69, and
change their mind for a 3rd time.
---
Fred J. Tydeman Tydeman Consulting
tydeman[at]tybor.com Testing, numerics, programming
+1 (775) 358-9748 Vice-chair of J11 (ANSI "C")
Sample C99+FPCE tests: http://www.tybor.com
Savers sleep well, investors eat well, spenders work forever.

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On Thu, 21 Feb 2008 16:39:31 -0600, "Elizabeth Richardson"
<erichktn[at]worldnet.att.net> wrote:


- quote -

Given the publicity this "game" is receiving (half-page review of it
in my local paper yesterday), I give it a very short life span.


-HW "Skip" Weldon
Columbia, SC

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"Douglas Johnson" <post[at]classtech.com> wrote in message

- quote -

I think this is the part of the "game" that I'd look forward to the most.

Elizabeth Richardson

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sandybeth <sandyhb6[at]yahoo.com> wrote:

- quote -

All of these are real risks.

- quote -

The good news is that this is free money, since you need to repay your actual SS
payments, not any earnings you may have made on them. You also get to repay
with inflated dollars.

- quote -

The other thing you need to do is keep careful tax records. To get the tax
credit on the repayment, you need to figure your taxes with and without Social
Security on every year you have received SS before the repayment year.

-- Doug

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I'm not very good at complex mathematical problems, so I'm thinking of
this social security game in a simpler way. You could take your SS at
age 62, bank it, hoping to re-apply at age 66, but find out that the
SS department has closed this loop-hole by then. Or they've reduced
benefits. Or you've invested all your SS benefits, only to lose a
great deal of it in a bad recession and can't pay it back anyway. If
you're looking at 5% no-risk interest rate, you need to invest in
CD's, which are below 5% now with no crystal ball into the future
rates.
If you're planning on applying for SS at age 62 anyway, you can just
wait and see (but make sure you're saving all the payments in the
meantime). If you planned on taking it later, you may lose the game
if any of the above happens.
SandyBeth

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"Puddin' Man" <puddingDOTman[at]gmail.com> wrote in message
news:52anr3t6oqv8hef3mpk8a85ftq6cneguml[at]4ax.com...

- quote -

No offsense taken; I took Ernie's 5% to mean a nominal rate. Personally, I
prefer to work in constant dollars, since it makes the calculations much
cleaner. (SS is inflation-adjusted, and by working in constant dollars, we
can zero out that effect). Same result, just much easier to see.

Assume 0% real interest rate on $96,000. At the end of 11 years, you still
have $96,000 in constant dollars.

SS benefit increase is $760/month the first year, and since it adjusts by
inflation, that's a constant dollar amount. After 11 years, one has 11 * 12
* $760 = $100,320. Actually a little less, since the SS inflation
adjustment is annual, not monthly. So let's just call it even after 11
years.

Give or take a little, same result either way - whether one calculates in
nominal dollars or constant dollars.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

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On Tue, 19 Feb 2008 13:45:43 -0600, "Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote:

- quote -

No offence, but none of the 5% calculations do much for me.

Real interest rate =~ nominal rate - inflation rate.

Any body looked at CD rates lately? The real inflation rate?

I wouldn't be surprised if the real interest rate were now
close to 0 or even negative. Of course, that will never be
reflected in the gov't numbers.

Puddin'

"Blues starts to rolling ... stops at my front do'.
I'm gonna change my way of living ... won't have to worry no mo'."
- from "Blues Before Sunrise", Leroy Carr, maybe 1934

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"Mark Freeland" <BnetOnewsX[at]sbcglobal.net> wrote:


- quote -

Expanding on this point: Almost all of this kind of analysis, e.g. should I
start at 62 or 70 or whatever, shows that it will break even on average. Which
proves the folks at Social Security have some pretty good actuaries.

It has been awhile since the payments have been set, so things probably break
slightly in your favor because of increased life span, but probably not more
than a few months.


- quote -

What this "game" lets you do is take both sides of the same bet. You can hedge
against dying early by starting payments at 62. Eight years later, if you are
still healthy, you can hedge against longevity.

-- Doug

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"Ernie Klein" <ecklein[at]pacbell.net> wrote in message
news:ecklein-2CDF3D.13021318022008[at]news.newsguy.com...

- quote -

Only for the first year. Each year, the increase in benefits ($760)
increases to keep pace with wages (CPI-W, not CPI-U). Also, since you're
assuming the $96,000 remains untouched (generating income), we should assume
that the extra benefits ($360+/month) likewise remain untouched and generate
income [at]5%/year.
http://www.ssa.gov/OACT/COLA/colaseries.html

Let's see what happens over 12 years:
1st payment: $360.00 * (1 + 0.05/12) ^ 144 = $655.15
12th payment: $360.00 * (1 + 0.05/12) ^ 143 = $652.43
13th payment: $382.80 * (1 + 0.05/12) ^ 132 = $662.73

The $382.80 comes from the fact that the whole $760 is inflation adjusted,
while your $400 monthly interest on $9600 isn't, so the difference grows
faster than the inflation rate.

After 12 years, by not spending the extra benefit but saving it, you'll have
$95,474.78. (One extra month will put you over the $96,000 target).

- quote -

See above. I too started with $360/month benefit, and to be fair, invested
the proceeds just as you were doing.

- quote -

Yes - the inflation adjustments of the total increase, and the fact that the
average life expectancy for someone aged 70 is around 11 years (i.e. this
pretty much breaks even on average). Finally, you control the choice of
whether to make this "investment". People in relatively healthy conditions
should consider taking advantage of this, since they have a good chance of
beating the odds. (Anyone can die suddenly, but we're talking conditional
probabilities here.)

Mark Freeland
BnetOnewsX[at]sbcglobal.net

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Ernie Klein <ecklein[at]pacbell.net> wrote:


- quote -

Take a look at:

http://www.retireearlyhomepage.com/cheap_annuity.html

In that example, they compare it with a Vanguard inflation adjusted life
annuity. They assume our rich friend starts Social Security at age 62, earning
a total of $131,664 by age 70. Since they are rich, 85% of that is taxable at
25%.

Our rich friend returns the $131,664 at age 70 and gets an $999 per month bump
in SS. They also get a tax credit of $27,979 that year for the returned money,
giving them a net cost of $111,914 for that $999 more a month that will go up
with inflation.

To purchase a Vanguard inflation adjusted life annuity paying $999 a month costs
$167,161 according to the site. That will vary with current interest rates.

So, if our rich friend was interested in the annuity anyway, he saves over
$55,000 by "buying" it from the government.

-- Doug

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rick++ wrote:
[...]
- quote -

Social Security is not a pension, it is social insurance (for example,
unlike private pensions, SS is "underfunded" and can only continue to
operate based on collection of current and future taxes).

Is this really the most outrageous "loophole" you can find with SS? I
can think of several others to get more worked up about.

-Mark Bole

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In article
<41c3eaff-9146-4f04-895f-543f7786a639[at]s12g2000prg.googlegroups.com> ,
"rick++" <rick303[at]hotmail.com> wrote:

- quote -

Looking at the example given; $1,000/mo. at age 62 and "starting over"
at age 70 you would have to give back $96,000, but you would receive an
increase of $760/mo. benefits.

The way I look at it, you would no longer have the $96,000, which itself
would generate $400/mo. income (assuming 5% interest) if left untouched.
Since you no longer have that income, it seems to me that the increase
in benefits is really only $360/mo. in terms of monthly income.

Also, assuming you are rich and don't need the money, then to repay
yourself the $96,000 using the entire increased benefit of $760/mo., my
investment calculator says that it would take almost 9 years (again
assuming 5% interest and monthly compounding of interest). If only the
real increase of $360/mo. was used it would take over 15 years.

In the mean time, if the $96,000 had been left untouched at 5% yearly
interest for 15 years you would end up with about $200,000, an increase
of $104,000, so it doesn't seem to me that there is much benefit until
sometime after the break even point of about 14-15 years -- and you
would be about 84 years old. If you die much before that, the
government wins.

I think I will pass on this deal, even though I did start SS at 62 and
could take advantage if it.

Am I overlooking something that would make this a good deal for the rich
like the OP assumes?

--
-Ernie-

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"rick++" <rick303[at]hotmail.com> wrote:

- quote -

It's true. See
http://www.ssa.gov/OP_Home/handbook/...book-1515.html

It also gives advantages to the less well off, say someone who starts SS at 62,
then gets a job. Until they reach full retirement age (65-66 right now) money
earned in the job over about $13,000 will reduce the benefit by $1 for each $2
earned. By withdrawing the application, they can avoid this 50% tax on their
earnings.

Apparently, most of the applications are exactly that. In any case, there only
100,000 withdrawal applications per year out of 48,000,000 recipients.

-- Doug

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Article claims you can withdraw a previous application
for social security, pay back 100%, then reapply with
updated-age benefits. Thats is, you apply at age 62,
bank the checks, they re-apply at age 65 or 70 and
get a stepped-up penison. Plus keep returns on
banked payments so far.

http://www.chron.com/disp/story.mpl/...s/5546299.html

If this is true, I'd like to see this loophole closed.
It gives an advantage to the rich who can afford not to
spend their pensions immediately.

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