 Welcome to Bogle Heads on Investing, episode number seven. Today we have a special guest, Mike Piper, the oblivious investor. Mike is an author and a CPA who has written many books, and today we're talking about Social Security. Hi everyone, my name is Rick Ferri and I'm the host of Bogle Heads on Investing. This podcast is brought to you by the John C. Bogle Center for Financial Literacy, a 501C3 Corporation. Today, my guest is Mike Piper, CPA, who is the author of several personal finance books and the blog Oblivious Investor. Mike also wrote the Open Social Security Calculator, which is a free online tool at OpenSocialSecurity.com. Mike has a lot of great insights for us on Social Security. Let's get right to it. Please welcome Mike Piper to the Bogle Heads on Investing podcast. Welcome, Mike. Hi, Rick. Thanks for having me. Well, thanks for being with us. I wanted to get you on the show because you have become the de facto go-to expert on Social Security with your books, some of your lectures at the Bogle Heads meetings, and also your Social Security Calculator, which has become very popular in it. The best part about it is it's free, which we all like. So, before we get started, you're a CPA, but could you tell us a little bit more about yourself and how you got involved in finance and particularly how you decided to write the Social Security book and do the calculator? So, I'm a CPA, like you mentioned. My background originally was tax accounting, but I haven't done any tax preparation, any client work for, I guess, about 10 years. All of my income comes from books. I have a series of books on an assortment of financial topics, various tax topics, investing, retirement planning, and Social Security. No client work. It's just research and writing. As far as how I decided to write a book about Social Security, it was just that people asked me to. I had written a book about managing an investment portfolio in retirement. It's called Canada Retire, and I focused exclusively on the investment portfolio side of retirement planning. And some people asked me to delve more deeply into Social Security. And I figured that's the thing I could probably do, given my background in taxation. I have a pretty comfortable reading legalese and figuring out what it means, and that's basically what Social Security research is. That's how I got into Social Security. The first place was writing that book at the request of readers. About a year ago, I started working on this calculator, and it's been released and available for six or seven months. And how I got into that was completely accidentally. My wife recently changed careers. She became a software developer, and I just was interested in having a better understanding of what she does. So I learned a little bit about programming, about writing code, and it seemed like a natural way to put that use, given my Social Security background. Well, I personally have used the calculator, and it works great. I appreciate you doing that work, and we'll get to some of the aspects of that calculator a little bit later on. But I just want to reiterate one thing that you said you don't take any clients that... I can't call you up and pay you to help me. Is that true? That's correct, right. I'm happy to answer questions, but no, I do not do any client work at all. Let's go ahead and start our discussion about Social Security, but before we get into the nitty-gritty of it, I've been reading a lot about how we actually got a Social Security program to begin with, and it goes way back to Civil War days and even prior to that. Can you give us a little history of what Social Security was supposed to be for and what it has become over the last, say... Well, it's only been around since 1935, so that would give us about 85 years. Exactly. The Social Security Act was originally passed in 1935, and of all the different types of benefits that we have now, the only major one that was available then was just plain old retirement benefits. There were no spousal benefits, no survivor benefits, no child benefits, no disability benefits, none of those things. The spousal benefits for wives and survivor benefits for widows, as well as child benefits, came a few years later, 1939, and then they extended those same benefits, so spousal benefits for husbands and widower benefits came in 1950, so a little bit more than 10 years later, disability benefits in 1956. So the program expanded pretty dramatically in the first 20 years, adding on all these different types of benefits. And then as far as major changes since then, there's been several automatic inflation assessments. Those began in 1972. The increase for retirement age happened in 1983. It's a program that's really evolved over time and continues to evolve. Just a few years ago, we had another change in terms of restricted applications and voluntary suspension rules. It's changed over time, and it will certainly continue to change in the future. I was reading that the very first person to receive Social Security benefit was a Cleveland motorman by the name of Ernest Ackerman, who had put one nickel out of his play into the Social Security system and received a payment back when he retired of 17 cents. So we've come a long way in the last 85 years. Mike, let's talk about your book, Social Security Made Simple. You wrote this book to explain Social Security in 100 pages or less. Is that possible to do? Not every single possible rule, with all the exceptions to the rules, but most of the information that most people need to know, I think is explained and hopefully explained clearly in that book. Let's go through some of the, let's say, the top 10 things people need to know about Social Security. And this would be people who are just starting work, people who have been in the workforce for a while, people like me who are in their early 60s who are looking at, gee, when should I take Social Security? Step by step, go through some of the major portions of your book and talk about some of these topics. First thing to know is that the amount that you get as a retirement benefit is based on two things. Number one is your earnings history. So how many years of earnings you have and how much you earn per year. And number two is how old you are when you begin taking your benefit. So as far as the earnings that they look at, the way the calculation works is they look at all of your years of earnings and they adjust years prior to age 60. They adjust them upwards for essentially wage inflation. Essentially, it's the growth in the national average wage that they're using to adjust it upwards. And then out of all of those years, they pick the 35 highest and from there, they calculate something called your average index monthly earnings, which is sort of just the average monthly amount out of those 35 wage inflation adjusted years. And from there, they calculate something called your primary insurance amount. And this is of all of the Social Security jargon. This is the one term that you really need to know what it means. And it's a primary insurance amount. And it is the amount of your monthly retirement benefit. If you file for your benefit exactly at your full retirement age. And it's a function of your earnings history, the higher your earnings, the higher your primary insurance amount. You mentioned full retirement age. How does that calculate it? For anybody born 1943 to 1954, it was a full retirement age of 66. And then for people born between 1955 and 1959, it's basically between 66 and 67. And then for anybody born 1960 or later, you have a full retirement age of 67. You said that they take the average of the highest 35 years. What if you don't have 35 years? What if you have 20 years or 10 years or just five years? Sure. Good question. So if you only have five years, you're not actually going to qualify for a retirement benefit in the first place because you need at least 10 years. But if you have, let's say, 20 years, then they fill in zeros. You get you up to 35. So they'll look at your 20 years of earnings and they'll be using 15 years of zeros. So definitely having 35 years of earnings will certainly help you to qualify for a larger benefit. What if you only have, say, eight years? You don't qualify. What happens to all the money you put in? Well, you don't get anything in the short version. In most cases... You've donated to the cause. Yeah, exactly. In cases where you only have eight years of earnings, potentially it's because the most common situation is that either A, you became disabled in which case you can qualify for benefits less than 10 years of earnings. Or maybe you spent a lot of years out of the workforce taking care of children. So it's likely that you're married or you were married. So you may qualify for special benefits or survivor benefits on your spouse's work record. I've always had a question of where does that money come from? If I worked and my wife didn't work, so I put in for me, but I never put in anything extra for her, when she starts getting paid half of my social security at some point, where does that money come from? I didn't put it in. Yeah, the system is not designed to be a retirement account, essentially. It's not designed to have what you would call, or what many people would call fair outcomes based on, you know, this person put in X dollars and this other person put in Y dollars. So the amount they're going to get out is based on exactly what they put in. That's not how it works. So you have two people who have exactly identical earnings history. One of them never got married and the other was married. And so one of them is going to have a spouse collecting benefits on their work record. Well, the two people put in the same amount, but one of those families is going to be getting more out. And the same could be said just based on, let's say you pay in for your entire career and then you had a heart attack and died at age 60. Well, you didn't get anything out then either. So it's really not designed even with the intention of working like a retirement account where the amount you put in and the amount you eventually get out are necessarily supposed to be proportional. It's more about taking care of people when they're most in need is roughly what Social Security is designed to do. So really it is an insurance program rather than a retirement program. Yes, absolutely. It's a social insurance program. That's precisely what it is. I think that that's really important for all of us who are paying in or taking out to understand that we often talk about Social Security retirement pay or the money we're going to get in Social Security in retirement, but it's really not a retirement pay. And the reason why all these quirky rules and regulations exist, and as you said, it may seem unequal that why would my wife who doesn't have 10 years of work because she stayed home with the kids, why should she get pay? Why should I get one and a half times my Social Security benefit when I never put the money in? It's just because that's what the insurance program says and therefore that's what happens and there's no equality to it, as you said, which is interesting. I think it's an aspect of Social Security that a lot of people don't really understand. Yeah, I think a related point, a lot of people look at the money they're putting in and they compare it to the money that they ultimately get out. But what they miss is that a big chunk of what you're paying is not just going to retirement benefits. You're also essentially getting a life insurance policy and a disability insurance policy while you're working. And a lot of people don't recognize that part of the taxes that they're paying goes towards that as well. On the disability side, you said you don't need 10 years to collect a disability Social Security benefit. How many years do you need? It depends on how old you are when you become disabled, basically. There's a calculation that I don't remember, honestly, at the time of my head. So we've talked about how your benefit is calculated at your full retirement age, but if you don't take your benefit at full retirement age, if you take it before or after, it will affect your benefit. Exactly. If you file for your retirement benefit before full retirement age, you get less than your primary insurance amount. And if you file after your retirement age, you get more than your primary insurance amount. And the math works based on months. So every month that you wait, you get a little bit more than if you had filed the month before. If you want to look at it from a year's perspective, for somebody who files four years before their full retirement age, you get 75% of their primary insurance amount. Somebody who filed two years before their full retirement age would get a little under 87% of their primary insurance amount. Somebody two years after full retirement age gets 116%. Somebody four years after their full retirement age gets 132%. The longer you wait, the more you get. And roughly speaking, somebody waiting all the way until age 70 to file will get about 75% more than somebody who files as early as they can. And that all sounds great, except there's a couple of issues with that. And you just recently wrote an article about this in your Oblivious Investor blog. Great blog, by the way. You do a great job with that. And that is that this extra money that you're getting, there's a couple of things that are happening. Number one, you're getting a year older, so you're getting one year closer to death. So you're not going to collect it as long, even though you're collecting more. And the other aspect of it is, if you collect it early, you could take the money and you could invest it and you could make money on the money. And let's say you just make a 4% return. You're not really... I mean, what's the break-even point? I mean, how does it all mesh out? Well, it depends on if you're married or not. Because if you are married, we have to be thinking about survivor benefits rather than just retirement benefits. But in the simplest situation, we're only looking at one person's retirement benefits and one person's life expectancy. If you compare filing at 62 versus filing at 70, if the person lives to age 80, then those two filing choices are basically the same. If they earned a return that exactly matches inflation. It's actually 80 and a half, 80 and six months. And the higher the return you get earned, the further the break-even age is pushed out into the future, basically. I think, though, one mistake that a lot of people make is that the rate of return that they're assuming or that they're using for this analysis is too high. Because generally speaking, when we're talking about delaying social security, so spending down your portfolio to delay social security, we're not talking about spending down your portfolio overall. We're not talking about specifically spending down your bond portfolio. We're essentially exchanging bondholding, so one fixed income holding for more social security. And that's what has, in most cases, a very advantageous outcome, not every case, but in a majority of cases. So let me understand this correctly. You're really now looking at social security as a bondholding in your portfolio or at least has similar characteristics. So if you're not going to take social security early, if you're going to delay, then on your portfolio side, your stock and bond, your investment portfolio, you would be taking your money out of the bond side and spending that because the social security portion, which is like a bond, although it's not exactly a bond, will be increasing in value. Is that what I understand you're saying? What I'm saying here is that when you're delaying social security, or if more broadly, when you're induitizing, you usually want to do it by using your fixed income holdings to buy that entity, or in this case, to buy more social security, essentially. Because that's what we're looking at doing, that's the analysis that we're making here is should I spend down my bonds to get more social security? The rate of return you want to use in your analysis is the rate of return that you would expect from your bond holdings. The rate of return that I usually use is 20-year tips because that's the thing that's most comparable to social security and that it's inflation-adjusted backed by the federal government and it has a duration in the rough ballpark of what a social security annuity would have. And that's the discount rate that's used by default when you load the calculator, you can adjust the discount rate if you want to. And a lot of people make this mistake of using, they say, oh, well, I can take the money and invest it and get a 4% return, so I'm going to take the money and invest it. Well, okay, fine. But again, you have the option. You don't have to be spending down your stock holding to delay social security. You can be spending down your bonds and in most cases, that's what makes sense to do. So that's the analysis that we're usually looking at. That's interesting. It's a really great way of looking at it. I hadn't really thought about it that way, but it makes complete sense to do it. Let me throw one more zinger in there that how does your health work into all of this? In other words, my parents are still alive and my father is 90 and my mother is in her late 80s. They're not going anywhere. They're basically unfortunately bound to a small apartment where they're living and my father is not going anywhere. So even though they might be making more money because my father delayed taking social security until he was 70 years old, the fact is he can't spend it now. So doesn't a quality of life also come into this equation? Sure. So there's a lot going on with that question. Number one is life expectancy. Again, we're still just talking about the simplest case here of an unmarried person because we haven't talked about how survivor benefits work yet. So for an unmarried person, the longer their life expectancy, the more advantageous it is to delay and the shorter their life expectancy, the more advantageous it is to file early. For a married couple, it's different because we have to look at joint life expectancies. This is a bit of a simplification, but roughly speaking, the way survivor benefits work is that after one spouse dies, the spouse who's still alive, the amount that they get from that point forward is roughly, in most cases, the amount whichever person had the higher benefit at that point, that amount is what the spouse who's still alive is what they continue getting from that point forward. And again, that's a bit of a simplification, but that's roughly how it works. With regard to the when to file decision for a married couple, for the higher earning spouse, when they delay taking benefits, it increases the amount that the couple gets as long as either person is still alive. So what we need to look at there is a joint life expectancy and specifically it's the couple's joint second to die life expectancy and conversely for the lower earning spouse, when they delay claiming benefits, it only increases the amount that the couple's joint receives as long as both people are still alive. So now we need to look at a joint life expectancy that's actually the couple's joint first to die life expectancy, which is shorter. And so the way that works out in terms of optimal filing strategies is that it's usually advantageous for the higher earning spouse to wait until 70 and it's often but not always advantageous for the lower earning spouse to file early. Micah, all this sounds great, but I'm not going to remember any of, well, maybe I'll maybe 10% of it. So I just want to find out from you if I used your Open Social Security Calculator online and I put all my data in, this is what it does for me, correct? It helps me figure this out. Yeah, that's what it's doing. By default, it uses the Social Security Administration's life expectancy mortality tables, but you can select different mortality tables if you're in better than average or worse than average health. And it essentially looks at all of the different possible claiming ages for you. And if you're married, it looks at all of the combinations of claiming ages for you and your spouse. And it determines which one is expected to provide the highest total level of spending over your retirement. And then after that, you can say, okay, so the calculator suggested filing, let's say, at age 70 for me and at age 63 and seven months for my spouse. What if instead I filed that 67 and my spouse filed at 65? How does that work out? And it tells you the total amount of spending that Social Security would be expected to fund over your lifetime with that set of filing ages. So you can see how different it is. And in some cases, what you'll find is that there are an assortment of combinations that work out fairly similarly. They're about as good as each other. And then there are claiming ages that are quite a bit worse. And so Social Security planning is not necessarily about picking the very best one, because the very best one and the next best one are usually about the same as each other, but not that different. It's about avoiding the really bad decisions. John Bogle always said, you got to get the big things right. Yeah, exactly. Don't make big mistakes. So your calculator will avoid big mistakes. And even if you're not absolutely perfect, you're generally getting it right. And so you've done well. Let me ask a question about inflation. So Social Security is adjusted for inflation every year unless there's deflation, which is a lowering of prices. And then Social Security is not adjusted down. So can you talk about inflation and Social Security payments? Every year, beginning at age 62, your primary insurance amount is adjusted upward based on inflation. And because your monthly benefit amount is a percentage of your primary insurance amount, what that means is that your monthly benefit amount is going upward based on inflation every year. And that's true regardless of when you do or don't file. So something a lot of people ask is, if I wait until 70 or if I wait until 68, do I miss out on those inflation adjustments? No, you don't miss out on them at all. The inflation investments started at age 62 regardless of the age at which you file. A lot of people also say there's also inflation in part B of my Medicare and so forth, though. It seems, one Boglehead wrote in, who said, it seems as though whatever extra I get in Social Security just turns over, I just turn it over to Medicare because I have to pay higher premiums there. I know this isn't a discussion about Medicare, but is it comparable? I mean, is that about what happens? Well, it's going to vary depending on the size of the person's retirement benefit. Because the larger their retirement benefit is, the larger the dollar amount of inflation adjustments that they'll get every year. The amount of your Medicare premium varies based on your income level. So it's going to vary from one person to another, but it is true, of course, that healthcare costs tend to rise at a rate that's quite a bit faster than prices in general. So faster than overall rate of inflation. Yes, it's often true that the increase in Medicare premium that you're going to see is going to take a big chunk out of the Social Security inflation just as you would get. I went back earlier this year, and I looked at how the government uses inflation of various things to determine levels. For example, how much of your earnings, the dollar amount of your earnings, do you have to pay where you have to pay into Social Security? I don't know what the level is right now, but maybe you do. What is the dollar amount? In other words, I make $120,000 a year. How much of that do I have to pay into Social Security? Oh, the maximum taxable earnings? Yes. For 2019, it's $132,900. It's the maximum amount of your earnings that would be taxable under Social Security tax. But this figure is one that is adjusted not based on price inflation, but based on essentially wage inflation, so increases in the national average wage. I find it funny that that goes up, it seems, faster than the benefit goes up. Government uses different numbers. I'm a military retiree, and they use yet a different number for determining my increase in my military pension. You've got this maximum amount that's taxed for Social Security, 132, which goes up seems to be like 6% a year. And then you've got Social Security, which goes up by something else. And then you've got my military pension, which goes up by something else. It's just interesting that the government uses all these different numbers for inflation. Yes, it is true that generally, over an extended period of time, average wages will grow by a faster rate than prices. So yes, the rate at which the maximum taxable earnings grows will usually outpace the rate at which benefit amounts will grow. And I suppose that this is a way of keeping the system solvent, which by the way, I do have a question on it. Let's get to that right now. A lot of people on the Bogleheads forum, when I announced that I was going to be talking with you and interviewing you and asked the Bogleheads to submit their questions, there was a few people who submitted a question asking about the solvency of the whole Social Security program. Could you address your thoughts on the solvency of Social Security? Stay over the next 50 years. The fundamental source to look at here is the trustees report. So the Social Security trustees put out an annual report that speaks an fair bit of that to this issue. And with regard to what they call the old age and survivor's insurance trust fund, which is the trust fund that pays for retirement benefits and widow and widower benefits, it has a projected depletion date of 2034. Then after that, what a lot of people think, I see this all the time, especially among younger people, they think that Social Security is going away. And it's not going to go away because when that trust fund is depleted, taxes are still expected to be able to cover about 77% of promise benefits. So even if no legislation was passed at all to improve the funding status of the program, we'd end up seeing a cut in benefits that's about 23% in 2034. Of course, that's not exactly the most likely scenario. More likely we'll see some sort of changes before then, which are probably going to be a combination of tax increases and benefit cuts rather than nothing happening at all. And then all of a sudden on one day we see a big cut in benefits, much more likely I would assume a combined sort of solution here. It's all math though. I was listening to Ellen Greenspan speak at a conference and he was saying that the Social Security system could be solved in 15 minutes because it's just all math. He said Medicare is a much more difficult problem that we have in this country. Oh, absolutely. Healthcare prices, there's a lot going into that in terms of unknowns and it's much harder to control Social Security not only is it just math, it's math where we know the numbers. We know about how long people live on average and we know exactly how many people there are who are currently age 60 and we know how many people there are who are currently age 59. So we can figure out fairly precisely how much the trust fund will have to pay out every year. It's more of an estimate how much it will be taking in every year of course because we don't know exactly how well the economy does. But yeah, we have a very, very good estimate here. The projections, so like I said I put out the trustees report every year and it doesn't change that much from one year to the next because the projection is basically bearing out according to plan. I think they're basically, you know, their projection is proving to be true so far so they don't need to adjust it very much from one year to the next. Mike, I'd like to circle back to the quality of life question about my parents who are, you know, basically unable to travel and unable to do very much right now because my father is in his 90s and really immobile. How do you look at quality of life issues as far as the decision as to when to take Social Security, whether to delay or not delay? Yeah, this is something that comes up a lot. A lot of people say that they want to spend more in early retirement rather than late retirement to be able to enjoy it more in the early years because they can travel and so on and that makes a lot of sense for many people, of course. What a lot of people don't understand though is that in many cases, and this is not every case, but in many cases, the plan that allows you to spend the most in early retirement is still delaying Social Security because delaying Social Security allows you to spend more over the course of your whole lifetime. You can choose when you do that spending. You can spend more earlier because you can spend more overall. Essentially, what you're doing is just spending down your portfolio at a faster rate and that's okay because spending down your portfolio at a faster rate in early retirement and that's okay because then when Social Security does kick in at this later age and at this higher amount, the rate at which you're spending from your portfolio will decline. So even in many cases where the person wants to spend more early in retirement delaying Social Security is still the best option, especially in particular for the higher earner in a married couple or for an unmarried person. Yeah, now wait a minute, wait a minute. You just threw a whole monkey wrench into this thing called the 4% rule which basically says you've got to save X amount of dollars where you can draw 4% off of that indefinitely for the rest of your life. What you're talking about, your strategy where you're incorporating Social Security into this just through a whole big monkey wrench into that. Yeah, it does. It definitely, definitely does. Vernon, Joe Tomlinson and Wade Fowle released a piece of research I guess maybe at the beginning of 2018 and maybe at the end of 2017 that talked about the strategy that I think makes quite a bit more sense and it's basically if you are planning to delay Social Security then figure out the amount of Social Security that you're giving up in the meantime basically and carve out a piece of your portfolio that's equal to that chunk of money and basically keep it in something very safe and you're going to be spending that down to delay Social Security and again that's what we talked about, you're basically spending down your bombs while you delay Social Security and then from the rest of the portfolio so the rest of the portfolio is where you're going to be spending a roughly equal amount through the course of your retirement. That's where the 4% or 3. whatever percent spending rules can be applied and that's where you're going to use a more typical balanced stock bond allocation. That makes too much sense, Mike. That was a great, great, great concepts and give me the name of that paper again So the name of the paper is Optimizing Retirement Income by Integrating Retirement Plans, IRAs and Home Equity and the authors are Wade Fowle Doe Tomlinson and Steve Vernon And where would be able to find that paper? So that's where I see it is stanford.edu Stanford? Yeah, I'm sure if you do google the name of the paper and the authors that would come up. Great. Let's switch to topics here and talk about application strategies and a lot of people thought that changes a couple of years ago took out a few of these strategies like file and suspend and they're no longer valid. Can you talk about what that was and what happened to it and what people might be able to do as an alternative? The file and suspend strategy is kind of weird but it became the famous one because it wasn't actually that useful for very many people. The one that was useful for a lot more people was the restricted application strategy and hardly anybody has heard of a restricted application unless you've done quite a lot of reading about social security and what a restricted application is that's where at your full retirement age you file for spousal benefits but only spousal benefits and you let your own retirement benefit be rolling until age 70. Let me zoom in for a second there I just want to make sure I understand is it at my full retirement age or is it at my wife's full retirement age when would I file this restricted application? The requirement is that you have to have reached your full retirement age and your spouse has to have started an air retirement benefit and then you can file an application for just spousal benefits. Now the bipartisan budget act is what they called it and that was 2015 that eliminated was the ability to use this strategy for anybody born after January 2nd 1954 so basically for people who are reaching their full retirement age roughly now it's still available but for younger people it's been eliminated but if you're somebody who is eligible for that strategy it is extremely beneficial because you're just collecting the spousal benefit with no downside whatsoever you get four years of spousal benefit while letting your own retirement benefit continue growing. But if my spouse is younger than me it would be at a reduced amount correct? No Spousal benefit is half of the other person's primary insurance amount and that's true regardless of when the other person files for retirement benefits so let's say when you reach your full retirement age let's assume you have a full retirement age of 66 and let's assume your spouse is three years younger so if your spouse starts per retirement benefit at age 63 she'll be getting a reduced retirement benefit and which is that she'll be getting less than her primary insurance amount and then when you in this scenario if you file a restricted application for a spousal benefit at that same time because you reached your full retirement age you'll be getting half of her primary insurance amount so half of what she would have gotten if she'd waited until full retirement age they're getting more than half of what she's actually receiving. Your spousal benefit is not reduced as a result of her having filed early. That's interesting. Yeah I don't think a lot of people know that. No, yeah people get confused about that all the time. So that goes away though for anybody who was born after 1954 that goes away so it's only available for people who right now are reaching full retirement age. Yeah, roughly it's January 2nd 1954 as they come off. What happens if the primary worker in the family passes and the widow is not yet full retirement age or the worker who put into the social security system wasn't at full retirement age what are the benefits for widowers and children of people who have died who have paid into social security? There's three different types of benefits here basically that we're going to be talking about the first one is the regular widow or widower benefit and eligibility for that begins at age 60. Okay, is it age 60 for the widower or age 60 for the person who was paying in? It's age 60 for the widow or the survivor. They have to be age 60. There's no requirement for how old the deceased spouse has to have been and the amount that they get this is one of the more complicated social security calculations so this is a simplification but it's if the surviving spouse waits until their full retirement age to file for survivor benefits they'll get the total benefit that they would get is essentially whatever the deceased spouse had been receiving or if they hadn't yet filed if the deceased spouse died before their full retirement age then the surviving spouse would get whatever the deceased spouse would have received if they had filed on their date of death if the deceased spouse died before their full retirement age and had not yet filed then the surviving spouse gets the deceased person's primary insurance amount so what they would have gotten if they had lived to their full retirement age and filed then. Now again just like any other benefits survivor benefits are reduced for early filing for widow or widower files for their widower benefit before their full retirement age they get less than the full amount. Now a super important thing to know for any widows or widowers is that a restricted application strategy that we talked about for spousal benefits it also applies for widow and widower benefits and it was not changed by the bipartisan budget act so it's still available to you regardless of what year you were born and you don't have to wait until your full retirement age so a strategy that frequently makes sense for a surviving spouse is to either file for survivor benefits as early as they can at age 60 while they let their own retirement benefit growing until age 70 or do the opposite so files for their own retirement benefit as early as possible at age 62 and let their survivor benefit continue growing until it maxes out at full retirement age so those strategies are for anybody who loses a spouse before this point either of those two strategies is almost always the best solution it's almost always the case that they should file for one benefit the smaller benefit specifically and let the larger benefit continue growing until it maxes out I'm going to ask a little bit of an esoteric question so a lot of people still are not under the social security system meaning they might work for a city or they might work for the railroad there are some groups out there there are some professions out there where they don't pay into social security they pay into something else but it's not social security so if I am a spouse and I work for the railroad so I'm not paying into social security but my spouse and my security and my spouse passes away I'm going to be getting a railroad pension while I still get half of my spouse's social security or survivor benefit from my spouse railroad specifically has their own and probably more equitable to more people is the government pension let's use government pension then so if we assume then that you worked for let's say the state of Illinois and you were paying into their retirement system but you weren't paying social security and your spouse was paying into social security and then she dies then you're going to be affected by something called the government pension offset which means that the amount that you can receive either as a spouse or a surviving spouse is going to be reduced by two thirds of the government pension amount that one does apply to a whole lot of people it does apply to a lot of people so Mike we've talked about widowers and our survivors and let's talk about to children now what benefits do children get and for how long do they get them if you when you file for retirement benefits if you have a minor child show somebody who in this case either under 18 adult time student up to 19 or you have an adult disabled child when you start taking your retirement benefits they can get benefits on your work records and that child's benefit is half of your primary insurance amount if for when you die if you have minor children or adult disabled children I can get a child benefit that is 75% of your primary insurance amount and I can be aware of something called the family maximum rule which basically is a maximum based on your primary insurance amount and the percentage vary but it could put a limit on the amount that your children and or surviving spouse could receive as a part of their child benefits and widow benefits I got a lot of questions on the Bogleheads forum about social security as it relates to working for another country or working in another country US citizen paying into another country's social security type system and how do you get credit for that here in the US could you talk about this because it came up a lot in fact three different people ask this particular question the topic that you want to look up is called the totalization agreement these are agreements that the US has other countries to basically lay out the rules for how a person will be treated under each country's social security system when they've paid into both both systems basically and the tricky thing here is that we have separate agreements with each country so the rules and the specifics are going to vary from one to another someone and I have to because of course each country has their own system with its own rules so the specifics of the agreements have to vary so the tricky thing here is that you're not really going to find anybody who's an in-depth expert on any one particular country for example I mean I write about social security all the time and I get tons of emails every week and I get maybe two or three people asking about totalization agreements per year and of course this year they might be asking about Germany and the UK and next year they might be asking about Canada and Japan so if I'm only getting one question about Canada every three or four years of course I'm never going to become an expert on it and the same goes for anybody that's even for me dealing with social security all the time I don't get asked about any one country's agreement very often I guess the takeaway here is that it's going to be super important for anyone in the situation to do their own research because of the agreement in question but as a general rule the way they work is they say that if you don't have enough years of earnings under one country or the other country's system to qualify for benefits the agreement will basically let you count earnings from the other country to qualify for benefits but they don't actually then end up calculating the amount of benefit for which you qualify so roughly speaking kind of vary from one country to another but in the US again you need ten years of earnings so let's say you only paid into US social security for eight years but you paid into Germany for instance if you paid into their system for several years you can qualify for US social security under the totalization agreement they'll allow you to count those years that you're paying into that other system one thing that people have to be aware of here is that in some cases you might also be affected by the windfall elimination provision which is the rule that basically reduces your primary insurance amount so it reduces your retirement benefit and the benefit of anybody else claiming benefits on your work record so anybody getting spousal benefits so the windfall elimination provision can in some cases apply one of the readers of the Bogleheads forum just was curious based on everything you know about social security at this age are you planning on taking social security and what is your rationale for when you are going to take it and by the way before we get to that you're in your early 30s correct 34 so mid early 30 okay so would you like to answer that question sure and again my age plays a huge role here because the true answer is I have no idea because I don't know what the system is going to look like when I'm 62 it's almost certain that there's going to be significant changes between now and then my honest opinion for somebody in their 30s is that there's no need to spend a lot of time thinking about when you're going to be filing for social security because the rules are going to change now if I were let's say in my 50s or 60 right now coming up on the age in question then I would almost certainly be waiting until 70 would be my plan and that's because I'm married and so far my earnings record is higher than the earnings record of my spouse that could certainly change and if that did change if she ended up being the one with the higher earnings record then I would encourage her to wait until 70 the strategy that I would be following is the same rough draft strategy I think makes sense to most married couples which is higher earner waits until 70 lower earner files somewhat before that and it depends on their life expectancy so if either person is in particularly poor health the lower earner should file pretty early if they're both in very good health the lower earner should wait but not necessarily wait all the way until 70 well Mike thanks we could go on for probably a week and we'll be talking about all the different scenarios that could take place but I want to thank you for being our guest on Bogle Heads on Investing we wish you a lot of luck with all of your book sales again Mike's website is obliviousinvestor.com please go there check it out and check out his open social security calculator and Mike what's the website for the open social security calculator that's opensocialsecurity.com great I've used it it worked well for me I know what I'm supposed to do now Mike thanks for being our guest thank you this concludes the 7th episode of Bogle Heads on Investing I'm your host Rick Ferry join us each month to hear a new special guest in the meantime visit BogleHeads.org and the Bogle Heads Wiki participate in the forum thanks for listening