Lessons from the Open Social Security Calculator

Over the last several months, many people have written in about the various things they’ve learned from using the Open Social Security calculator. I thought it would be worthwhile to collect the most common such lessons in one place.

One thing that’s interesting to me is that these are all things that I (and other people) have been writing about for years. But for many people, being able to fiddle around with a calculator was what it took for the concepts to actually “click.”

As far as Social Security rules, there are a few things that frequently surprise people:

• Restricted application strategies are still available for people born 1/1/1954 or earlier.
• Your benefit as a spouse may be more or less than 50% of the amount your spouse is receiving.
• It is possible (common, even) for a person to receive a retirement benefit and a spousal benefit at the same time.

As far as claiming strategies, the big takeaways depend on whether we’re talking about an unmarried person, the higher earner in a married couple, the lower earner in a married couple, or a divorcee. (For a widow/widower, there’s no need for a calculator, as the optimal strategy is fairly easy to determine.)

For an unmarried person, it’s usually advantageous to wait until somewhere in the 68-70 range. But this decision will be significantly impacted by the life expectancy selected as well as the discount rate used.

For the higher earner in a married couple, in the overwhelming majority of cases, it is wise to wait until 70 to file for retirement benefits. Doing so usually significantly increases the amount the couple can be expected to spend over their lifetimes. That said, there are some exceptions. For instance:

• When the spouse with the lower primary insurance amount has a sizable government pension (such that the government pension offset would eliminate any Social Security survivor benefit they might otherwise receive), it becomes considerably less advantageous for the higher earner to wait.
• When the lower earner is considerably older and has a much lower retirement benefit, it becomes less advantageous for the higher earner to wait (because the cost of waiting is much greater — because the lower earner can’t get his/her benefit as a spouse until the higher earner has filed for retirement benefits).
• When child benefits are involved, it often pushes the ideal filing age earlier.*

For the lower earner in a married couple, there are a few lessons:

• Waiting until 70 is usually not the best strategy.
• However, the decision is not usually very impactful (e.g., claiming at 63 is not usually super different from claiming at 66).
• The decision is more heavily affected by inputs such as life expectancies and discount rates (whereas the decision for the higher earner doesn’t usually fluctuate much).

For a divorcee who was married for 10+ years prior to divorce, if your ex-spouse has a higher earnings record, the decision is analogous to the decision for the lower earner in a married couple. That is, because you might have the option for a survivor benefit later, it’s often ideal to file for your own benefit early. To be clear though, while this is the strategy that usually maximizes expected spending, it’s somewhat high-risk, in that it’s essentially a bet on your ex-spouse dying somewhere around a “typical” age. If they live well beyond their life expectancy, you’ll be stuck collecting your reduced retirement benefit in the meantime.

For a divorcee with a higher earnings record than their ex-spouse, the decision is analogous to that for an unmarried person (i.e., it’s usually advantageous to wait, but not necessarily all the way until age 70).

*I’m still working on functionality for child benefits for married couples. Progress is slow (slower than I had anticipated, frankly) but steady.